Corporate governance has become an issue of global concern. It is the framework that allows companies to thrive by addressing the interests of various stakeholders, including employees, shareholders and customers, experts say.
It underpins market confidence, integrity and efficiency, and hence promotes economic growth and financial stability. Corporate governance is thus of great relevance both to individual banking organisations and to the international financial system as a whole, and merits targeted supervisory guidance.
There are numerous benefits to good corporate governance, including improved company culture, increased accountability, ability to spot potential issues before they occur. But, more than that, it shows investors that the business is organised and well placed to work in their best interests. So, it is crucial that organisations understand how to ensure good corporate governance.
The director-general of the Institute of Directors, Mr Dele Alimi, said poor corporate governance was largely responsible for the high mortality rate of startups in Nigeria.
“The absence of good governance allowed negative tendencies to fester in an organisation and it was only a matter of time before such an organisation would start to feel the stress and challenges, which, if not nipped in the bud, would lead to hemorrhage and ultimately business demise,” Alimi said.
H added setting up a corporate governance structure would help managers and business owners to run their organisations properly and ensure that their firms were sustainable.
The chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the impact of poor corporate governance on startups was obvious.
“Poor corporate governance leads to a high mortality rate of small and medium enterprises, particularly because many of them do not apply the principles. Many of them cannot distinguish between their business and their personal life. Some of them set up businesses and put people there, especially their relations or children, even when those individuals know little or nothing about the businesses in question.
“So, those things accelerate the collapse of many businesses because people do not apply those sound corporate principles, so the business doesn’t endure. For me, that is the main consequence and when SMEs are dying very fast, it also affects the economy. The SMEs also have a very big role to play, especially in job creation. There is the need to give capacity among startups on the imperative of corporate governance and running businesses properly,” Yusuf further said.
Elements Of Good Corporate Governance.
Having an effective board of directors that is collectively responsible for ensuring success in the long term, led by a chair who is committed to continuous improvement.
A board that features a balance of competencies, experience, company knowledge and independence.
Directors that are able to dedicate sufficient time to their responsibilities, receive a great induction and have the opportunity to regularly update their skillset.
Regular evaluation of board performance as well as that of the individual directors and committees.
Good corporate governance can also be understood as transparent and ethical. Although hard to quantify, this approach to governance is hugely important when balancing profitability with the board’s duties to investors and other stakeholders.
Benefits Of Good Governance
The benefits of good corporate governance are countless.
Compliance; The business carries out its functions in a manner that complies with the rules and regulations in the regions in which it operates. This helps it avoid costly penalties and reputational damage.
Efficiency of process; Streamlining your organisational procedures allows you to look at your existing processes within the business and find ways to make them more efficient.
Risk identification; If you can accurately identify risk factors, you can mitigate them before they become an issue. This forward-thinking, strategic approach gives a real competitive edge.
Better decision making; Good governance gives top-level decision-makers the information they need to make quick and effective choices.
Strong strategic planning; Access to vital information coupled with good internal communication lay the foundations of a board that can create better business strategies.
Moreover, effective corporate governance is key to the long-term success of the company in an ever more competitive business landscape. It is a way of gaining an advantage over competitors through creating leaner processes, as well as entering into an honest and open dialogue with shareholders, suppliers, employees and all other stakeholders.
