Every company needs a good reputation, and good corporate governance is one of the best ways to accomplish this. Lisaveta Ramotar discusses various steps that go into it.
A solid leadership is vital for any company, and the larger the company is, the stronger and more responsible the leadership must act. Good corporate governance requires that the leadership, which typically includes a company’s board of directors, manage the company using a strict and clear set of rules and practices for people to follow at every level of the company. The company has an obligation to its shareholders as well as other entities, and good corporate governance can help keep these different entities happy and create a good corporate reputation. Lisaveta Ramotar explains how a solid corporate governance works.
Lisaveta Ramotar: What the duties of corporate governance include
The most important benefit of corporate governance is that it allows for the company to be managed in the shareholder’s best interest. A company has many stakeholders, the most obvious ones are the shareholders who Lisaveta Ramotar says provide share capital, but others include the employees, customers and the community within which the company operates. It is important that the board of directors consist of individuals who not only have relevant experience that would allow them to execute their corporate governance function effectively but importantly that they are all working in the best interest of the company. Poor Corporate Governance sees investors’ rejection of the company which manifests itself in low share prices, negative press coverages – which impacts the company’s reputation, reduced chances for business collaboration and even customers abandoning the company’s product. Lisaveta Ramotar points out, with poor corporate governance the challenges of the company may be further exacerbated with the best employees leaving the company, therefore, reducing productivity and the generation of new ideas which can further reduce share prices.
Lisaveta Ramotar notes that good corporate governance would be reflected in strong investor confidence and improving share prices. Lisaveta Ramotar notes that good corporate governance may also see a company being a good corporate citizen and leaving a good impact on the world. Lisaveta Ramotar stresses that companies with a strong corporate governance also sees a high competition for a chance to work with the company. Lisaveta Ramotar mentions that other signals of a company having a strong corporate governance is employees displaying strong ethical values, and/or the company being aware and minimizing its environmental impact. Lisaveta Ramotar recommends choosing competent, qualified, and ethical people to serve on board of directors; a bad choice can have misaligned interests and may even be actively opposed to what is in the shareholders’ best interest Lisaveta Ramotar points out.
Lisaveta Ramotar also notes that it should be in the Board of directors’ interest to have good corporate governance because it allows not only less bad press but less scrutiny from regulators. And as Lisaveta Ramotar states, while it is true that scrutiny should not be feared if nothing is hidden, the fact is, that scrutiny by regulators or even unjustified lawsuits take away valuable company time from activities that can grow the company and increase shareholders’ value.