What is corporate governance and how does this methodology impact company results – WAU
The definition of corporate governance covers the processes and parameters used to establish the functions of each employee in the hierarchical scheme of a company, as in the instances of government.
Achieving success in the business world depends on many factors. Maintaining a company’s process management, positioning itself in the market and facing the competition, structuring and executing action plans in an organized manner and promoting compliance with certain rules and controls are actions that are part of what it means to have corporate governance.
Find out the most important aspects of this concept, how it can help you achieve a company’s goals and everything you need to know before implementing it.
In this post we will see:
What is corporate governance and how can it help your company?
Corporate governance is a management mechanism that functions as an entity responsible for establishing and maintaining rules compliance within an organization. Its objective is to improve the financial quality, the achievement of goals and the growth of a company.
It is a system that allows to direct and control enterprises in an organized way, being governed by its principles and values and watching over the interests of all that are part of its structure, such as:
- owners or CEOs,
- Administrative Council,
- and consumers.
What are your main functions?
Good corporate governance must ensure that all the bodies that make up a company function correctly. What does that mean? What there must be commercial harmony between management, who invests in the company and who manages it.
Thus, good communication flows, everyone is fully involved in financial processes and can move the organization forward. Among its functions, corporate governance must promote the legal processes that govern a company.
In addition, it serves to guarantee and facilitate the participation of shareholders in decision-making, giving equal treatment to each of them, regardless of the percentage of investment they have in the company.
Corporate governance also seeks to establish responsibilities in organizational structures. Although this is a little-known practice for some people, the truth is that, over time, corporate governance has become a trusted tool in the business sector. Especially for those who wish to enter the market as investors.
How is the corporate governance structure?
The structure of corporate governance may vary according to the business model. In general, when a company decides to apply this management feature, its organizational chart grows, placing itself above the figure of the general manager. This structure model is divided into four pillars, which we present below.
Family council or partners and shareholders
They represent the highest level of an organization’s corporate governance structure. They decide how they want to invest their assets.
Formed by entities or people who invested in the company. Within this range of the structure are responsible for assessing the possible risks and the return on each investment made.
Board of Directors
Composed of external directors, investors and owners. They are responsible for defining strategies and supervising the company’s management team in fulfilling its objectives.
It is the administrative body of the company and includes the management group, in addition to external control systems, represented by audits; and internal, such as institutional risk management programs.
How important is corporate governance for companies?
Corporate governance enables companies to work with a greater sense of responsibility. It also allows for greater transparency in administrative processes and, therefore, generates confidence in all allies and stakeholders that allow the organization to move forward and be successful.
With good corporate governance, companies can focus not only on achieving profitability goals, but also on the possibility of growing through their corporate identity and their commitment to society through social programs.
How to implement corporate governance?
To implement corporate governance in a company, it is important to have a management team. This team must have a high institutional commitment, linked to the moral values, mission and vision that govern the organization.
It is possible to establish corporate governance since the birth of a company. This can be done by defining government structures similar to those mentioned above. Some processes may change depending on the type of company.
The first thing to do is establish the organizational structure through which it will be possible to increase the company’s transparency, optimize resources and define the policies that will govern each process.
You should take note of any ideas that come up and choose the most important and logical. This will lead to dialogue between partners and shareholders to reach agreements, identify possibilities for growth and clarify doubts about the future of the company.
Once the organization chart is formed, it is important to define the company’s mission, vision and values and, subsequently, to develop corporate governance, control methods and audit procedures.
What are the benefits of implementing corporate governance?
The application of a corporate governance system allows the company to visualize long-term objectives. In addition, it improves the quality of work with an organizational climate that allows ideas to flow smoothly.
These characteristics are directly reflected in the interest of investors, who value participating in a successful company, committed to society and that above all is transparent in the execution of its goals and objectives.
The chances of going through financial crises are also reduced, as the processes are more controlled, which facilitates decision making.
If you’ve made it this far, you already know the most important aspects of having corporate governance within the organizational culture.
It is interesting that you know that any company can benefit from this strategy that helps to improve the direction of the business and allows to make formal and appropriate decisions. For a company to be successful, it is important to keep the focus on developing processes that help identify the customer’s needs to satisfy them in the best possible way.
Do you want to know what other ways there are to improve the organizational climate within a company? Then enjoy the visit to our blog and download our 360º digital transformation e-book.