A well-defined corporate governance structure ensures transparency and fairness, helping your company cultivate solid relationships with shareholders and the community. It helps define the roles and responsibilities of each, as well as accountability, and allows for compliance with laws and regulations. It also assists in implementing a company’s long-term growth strategy by aligning the interests of shareholders with the interests of the board and management.
There are many types of corporate governance, however the one that works best for you will depend on the company’s goals and its the culture of your company. The most important things to be aware of are:
Unitary Board Structure
In this corporate governance system, the board of director is responsible for making decisions and oversight of the company’s activities. The board includes both non-executive and executive directors. This type of structure is common in mid-sized to small businesses.
Continental Model
Continental’s two-tiered structure is a structure that grants control to a management board, and a supervisory panel. The management board consists of insiders from the company including managers and executives. The supervisory board is composed of outsiders like bankers who have stakes in the company.
Stakeholder-Oriented Governance
Unlike traditional structures that prioritize shareholder interests, this type of governance structure takes into account the needs of all stakeholders, including customers, employees and vendors as well as the community. It encourages boards to develop relevant engagement programs and implement policies that reflect larger environmental and social concerns. The board should be open about its decision-making process and share that information with all stakeholders. It should also ensure that there are clear lines between management, the my link board and shareholders.