Pillars Of Corporate Governance
We see pillars of corporate governance as values that guide the directions of corporate governance polices. These pillars play huge roles in how the entity will turn out. They also dictate if a professional relationship can materialise among the stakeholders.
Entities operate under different geographic regions, political climates, regulatory policies and communities, thus they need different sets of pillars to ensure effectiveness.
We believe there are 2 pillars that should always be present. They are:
- Fairness and
Fairness In Corporate Governance
Fairness means to treat all stakeholders including smaller ones (e.g. minority shareholders) reasonably and equitably. Channels should also be provided for them to voice their opinions and any injustice they encountered, with their voices taken seriously.
Fairness should be exercised during the initial policy formation of corporate governance and in the day to day operations of the entity.
With Fairness in place and active, we have happier stakeholders. This reduces the attrition of stakeholders and increase their sense of ownership. With increase sense of ownership we are likely to harvest increased participant and contribution. Reduction of conflicts also create an amicable environment for fruitful discussions and helps in the buy-in of future policies.
Transparency In Corporate Governance
Transparency means nothing to hide and since we have nothing to hide we make it easy for people to observe our processes and dealings.
There is much value in Transparency as it increases the confidence that shareholders, public and governing bodies have in the entity, paving the way for future growth.
This can be achieved by
- Preferring simple easy to grasp processes instead of complicated ones (often designed to throw people off).
- Provide consistent & detailed disclosure of processes, decisions and dealings.
- Maintain full sets of documentation to vouch for what was disclosed. A reliable Electronic Document Management System EDMS is key to fulfilling this. It makes filing intuitive and systematic for board members, management staff and employees, reducing the episodes of lost documents and email conversations.
- Day-to-day operations and decisions making should adhere closely to the disclosed protocols with proper documentation to prove the adherence. Likewise, If there are deviance, proper justifications and approvals must be available for audit when requested. With these, the entity can be audited at anytime with all proper documentations in place.
Here are the 2 pillars of corporate governance that we believe should have a permanent place in all corporations. We hope we have helped in deepening your understanding on Corporate Governance.
Do see our upcoming article to holistically grasp how a Document Management System is crucial for enabling Transparency in Corporate Governance.