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Is good corporate governance your firm’s cornerstone?

OFFICE

A good corporate governance scheme will make clear to every officer of the company their duties and will encourage them to keep these duties in mind when making decisions. FILE PHOTO | NMG

Over the weekend I had an opportunity to attend my accountancy professionals sacco special general meeting. It took us more than three hours to agree on the agenda of the day. Most of the questions were on governance issues while giving examples of failed saccos in the country. Good corporate governance has been attributed to many large organisations’ success.

From the boardroom to the triple bottom line, it has been hailed as one powerful tool that brought about sustainability of organisations in this competitive era. My article today is aimed at exploring the benefits of good corporate governance to company’s growth.

Corporate governance is the corner stone of any good business.

It encompasses the processes, practices and policies that a company relies on to make formal decisions. When executed effectively, it can prevent corporate scandals, fraud and the civil and criminal liability of the company. It also enhances a company's image in the public eye as a self-policing organisation that is responsible and worthy of shareholder and bond holder capital. It dictates the shared philosophy, practices and culture of an organisation and its employees.

It keeps a company honest and out of trouble.

A firm without a system of corporate governance is often regarded as a body without a soul or conscience, if this shared philosophy breaks down, then corners will be cut, products will be defective and management will grow complacent and corrupt. The end result is a fall that will occur when gravity — in the form of audited financial reports, criminal investigations, finally catches up, bankrupting the company overnight.

Dishonest and unethical dealings can cause shareholders to flee out of fear, distrust and disgust. Furthermore, a good corporate governance scheme will make clear to every officer of the company, her duties and will encourage them to keep these duties in mind when making decisions.

Aids a firm’s public acceptance

A company with corporate governance is widely accepted by the public. This is mostly due to the idea of disclosure and transparency that comes with corporate governance. With full disclosure and the ability for people who work in the business to get information, as well as the general public, there is a higher level of trust. There’s also the fact that due to the way that corporate governance is set-up, there is a lower chance of fraud and company-wide criminal activity, which helps gain the trust of the public as well.

Company protects its stakeholders.

By ensuring that the company retains its records in the company books and maintains its statutory registers, they will be protected. Maintaining these records also means that officers of the company can be held accountable through documentation for their actions if necessary.

It also means that a shareholder cannot unnecessarily contest the actions of the officers. They can be shown the company books, approved resolutions and board minutes if necessary and rest assured that the officers are acting within their authorities. Company practicing good governance allows people not linked to it to be able to assess its governance due to transparency.

Ensure integrity and ethical behaviour.

To me, this element of corporate governance means that we should always act with the highest integrity. That means regardless of the situation, company always seek to find the truth and then do the right thing.

Integrity means always acting honestly and truthfully without deception, standing for what you believe, keeping promises, being true to the company’s purpose, not taking unfair advantage of others.