Compiled from; Centre for Corporate Governance http://ccg.or.ke
Corporate governance is a very important aspect of any business. If you have wanted to create a business, then it’s important to explore the importance of corporate governance and how it can help your company. There is a lot that goes into running a business obviously, and understanding things like corporate governance is one small part of the big picture. You should therefore start walking down the path of corporate governance if you really want to own your own corporation one day. But one would ask a simple question, why is corporate governance important to a business?
Importance of corporate governance Decision making and accountability By just seeing how corporate governance works, one can tell why it is important. It will help streamline the process and gives people accountability. The major point of corporate governance is to help in the decision making process. One of its main goals is to clearly explain to the board, the stakeholders and the shareholders what their duties and responsibilities are within the company.
Lowering risk
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This is one of the most important aspects of corporate governance. Through corporate governance, scandals, frauds and criminal liability of the company can be prevented or avoided. Since the people involved in the organisation know what they are accountable for, the actions of one person doesn’t mean the downfall of the entire corporation. Being able to properly identify specific roles in a corporation allows decisions to be made and they won’t have any negative effect on the overall corporation. This also means that the offender will be much more quickly identified and punished instead. Another attribute of corporate governance is that it is self-policing. This means that whenever the corporation has issues it will have the capability of handling its matters first before involving any external forces. This level of handling business on its own, instead of being forced into making decisions outside of the company, helps keep the corporation self sustainable. A company with corporate governance is widely accepted by the public. This is because of the idea
Public acceptance of disclosure and transparency that comes with corporate governance. With the 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. Due to the way corporate governance is set up, there is a lower chance of fraud and company wide criminal activity. This helps the company gain the trust of the public as well.
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Public image Many corporations hold a high level of corporate governance and this is because a company has a public image it needs to maintain. With corporate governance, the corporation takes more responsibility for its actions, and also allows it to keep tabs on what is going on as well as help those in charge remain more aware of the public image of the corporation. Due to the fact that a corporation is also evaluated based on its image, corporate governance is established to help ensure that the image of the corporation remains clean. It also makes sure that there is a high level of awareness, ethical behaviour and understanding of what the public wants is all encompassed in corporate governance.
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For more information please visit; http://ccg.or.ke
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