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What are the Best Tips for Effective Corporate Governance?

Article Details
  • Written By: Felicia Dye
  • Edited By: Heather Bailey
  • Last Modified Date: 30 October 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Making sure that positions are filled with people who live up to the requirements of those positions is one of the best tips for effective corporate governance. This means that organizations with a board of directors need to make sure that those individuals are serving the best interests of stakeholders. People who are in high ranking positions need to demonstrate their value. Also, policies of transparency need to be implemented and upheld.

A company that has effective corporate governance is not run solely by compliance. Although it is imperative for operations to be lawful at all times, it is also essential that a company have the ability to self-regulate. Many companies have outlined numerous standards and restrictions, yet staff are not strictly required to adhere to any except those that pose legal issues. Allowing this attitude to develop or persist in an organization is a sign of poor and weak governance.

Some companies operate to the other extreme. They are stricken with procedures and micromanagement and cross management, which makes it appear as though the organization has excellent corporate governance. In reality, what tends to happen in these situations is that the company becomes ineffective because people who are trying to perform their duties meet constant obstacles and other people are too occupied with overseeing duties that are not theirs. Effective corporate governance allows everyone adequate opportunity to perform and keeps everyone within the boundaries of their positions.

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Managers need to manage and specialists need to display their expertise. Effective corporate governance requires that people stop showing up to work just for a paycheck and that they be held responsible for their duties. Many companies are filled with people who have excellent salaries and benefits, yet their performance is substandard. This can negatively impact a company in several ways, including financially and by encouraging low employee morale.

Acting in the best interests of the stakeholders is an essential part of effective corporate governance. A board of directors has a legal obligation to govern a company. Individuals who sit on a board are supposed to oversee the company's operations and ensure that goals and objectives are supported by solid strategies. Furthermore, it is their responsibility to make sure that those strategies are implemented, and in instances where they prove ineffective, that they are replaced. By doing this, the best interests of the company are also generally served.

Transparency is another essential feature of effective corporate governance and it applies to any type of business, whether it be governmental, for-profit, or nonprofit. When people are allowed to operate under the cover of the ignorance of the masses, an organization can become unruly and riddled with problems that are difficult to correct. This is often seen when scandals are revealed and it is found that instead of a single illicit master plan, numerous people have simply become rogue.

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