A well-defined corporate governance structure promotes fairness and transparency which helps your company build an enduring relationship with shareholders and other members of the community. It helps identify roles and responsibilities, ensuring accountability and helps ensure compliance with laws and regulations. It also helps a business’s long-term growth strategy through aligning shareholder interests with the interests of the board as well as management.
There are many different types of corporate governance, but the one that is most effective for you depends on your company’s goals and culture. Keep in mind the following concepts that are essential to understand:
Unitary Board Structure
In this system of corporate governance the board of directors is accountable for taking decisions and overseeing corporate activities. The board includes both non-executive and executive directors. This type of structure is common in mid-sized and small companies.
Continental Model
A two-tiered system, the Continental model gives control to a management board and the supervisory board. The management board is comprised of the company’s insiders including executives and managers. The supervisory board is composed of outsiders, such as bankers and union representatives who have stakes in the company.
Governance that is based on stakeholder involvement
In contrast to traditional structures which focus on shareholder interests, this kind of governance structure considers the needs of all stakeholders including customers, employees vendors, and the community. It encourages boards to develop meaningful engagement programs and adopt policies that reflect broader environmental and social concerns. The board must be transparent about its decision-making process and share that information with all stakeholders. It must also ensure that there is a clear line of communication between the board, management and shareholders.
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