Benefits of Corporate Governance6th May 2021 0 By indiafreenotes
Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and social goals.
Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two. The owners must see that individual’s actual performance is according to the standard performance. These dimensions of corporate governance should not be overlooked.
Some of the benefits of good corporate governance include:
- Builds morale, reputation, and a legacy
Implementing procedures that support good governance enhances a company’s identity where stakeholders and potential investors are confident to place increased levels of trust in you, which in turn allows you to develop stronger, longstanding relationships.
- Increases success rate for financial performance and enhances sustainability
Implementing protocol for good governance is intended to assist with being able to quickly identify issues as well as to quickly make decisions to resolve these potential issues thus reducing the eventuality of a crisis and the cost it bears.
- Creates a greater ability to attract and retain talent
A significant focus has been placed on culture being a key contributing factor to the success of a company. Maintaining transparency surrounding fairness, accountability and operations, gives your employees a greater sense of responsibility and awareness as to where they are positioned to create value within an organization.
- Creates an effective framework aimed at meeting business objectives
Decision-making that takes into consideration major stakeholders such as employees, suppliers and the community alike has created a wider vision for successful results. Providing each stakeholder with a percentage of valuable involvement creates a more accountable culture, generating a higher potential to reach objectives within an organization.
- Creates more opportunities to gain a competitive advantage
Every industry is either constantly evolving or has the potential to evolve at a certain point; adopting good governance and creating an environment where its practices can be sustained is vital to ensuring that your organization is adaptable to change, thus providing a greater competitive advantage and chance at survival.
- Creates opportunities for investment
An organization that represents stability and reliability increases its chances of attracting premium investors, as well as increasing their opportunity to borrow funds at a better rate.
- Provides a practical way to guide decision-making at all levels
The ability to make informed decisions can quickly improve performance and reduce the effects of potential failures. One way to promote this kind of decision-making ability is to ensure that information is readily available to key stakeholders, i.e. a culture of transparency.
Strong corporate governance practices can increase the effectiveness and efficiency of business operations through instilled values that emanate from leadership throughout and has the potential to yield major benefits for an organization.