The Importance of Business Governance
Governance is the process of placing checks and balances in place to ensure that your business runs smoothly, meets its objectives and is able to take the appropriate risks, and maintains integrity. It is the process of identifying the most efficient ways to manage your organization and understand changes in the world that are not within your control. This helps your business build an enduring relationship and build trust with the community, its shareholders and customers.
A solid set of business governance procedures in place can help you attract investors, especially during times of high growth or when your company encounters a crises. It also shows you care about the future of your business and are prepared to face challenges that may arise in the course of your business.
Investors are more likely invest in companies that have good governance that shows they take the time to make educated decisions and operate on a transparent basis. It also shows that your business is committed in meeting legal, ethical and market-driven requirements with the various stakeholders, like employees, consumers and suppliers, local communities, and the decision-makers.
The board should have the capacity to meet its duties to shareholders by having enough independence and expertise, adequate size, and a balance between executive and independent directors. It should be able oversee risk, review, and monitor management performance and have a clearly defined process for resolving such issues as conflict of interests or failure to meet the requirements. It should also be able communicate effectively and transparently with shareholders about governance issues.