A clear corporate governance structure promotes fairness and transparency which helps your company build an excellent relationship with its shareholders and the community. It defines roles, provides accountability, and allows for compliance with regulations and laws. It also helps a company’s long-term growth plan by aligning shareholder interests with the interests of the board as Maximizing Deal Success: The Strategic Benefits of Using M&A VDR well as management.
Corporate governance is a complicated concept that is dependent on the mission and culture of your business. A few key concepts to be aware of are:
Unitary Board Structure
In this corporate governance system, the board of director is accountable for overseeing and making decisions about the activities of the company. The board is comprised of both executive and nonexecutive directors. This structure is common in mid-sized to small businesses.
Continental Model
A two-tiered system, called the Continental model gives control to a management board as well as an oversight board. The management board is composed of insiders from the company, such as managers and executives. The supervisory board consists of outsiders like bankers, and union representatives with stakes in the company.
Stakeholder-Oriented Governance
This type of governance structure is different from traditional structures that focus on shareholder interests, considers all stakeholders, including employees, customers and vendors and the community. It encourages directors to adopt policies that reflect environmental and social concerns and to develop meaningful engagement programs. The board must be transparent about the process of making decisions and make it available to all stakeholders. It should also ensure there is a clear line of communication between the management, the board and shareholders.
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