The Corporate Governance Institute (CGI), the global body that trains and certifies company directors and board members, defines corporate governance as the processes, practices, and policies used to make formal decisions and run the company.
It is the way in which directors and managers control a company and make decisions, especially decisions that have an important effect on the shareholders.
Corporate governance has become increasingly important in the world of business, the public sector, non-profits, education and other types of companies.
When there is good governance, the board of directors meet regularly, retain control over the business, divide responsibilities clearly, and ensure that risk management is ongoing, the CGI outlines.
Management and director’s roles are clearly defined and responsibilities apportioned. It is the company secretary’s duty to make sure board procedures are followed and that directors comply with all relevant rules and regulations.
While corporate practice varies from company to company, the CGI highlights that good corporate governance can help reduce the chances of corruption in the company.
It states,“Fraud and scandals within a company occur more frequently when directors and executives are not required to follow a formal governance code.”
Board members should meet regularly, retain control over business matters, and monitor the management, including the CEO. They should never be in the dark, relating to company operations.
A proper governance system also ensures protection of members, officers and management through transparent operations, checks and balances and proper reporting systems.
The CGI said an important element of good governance is the keeping of accounts and registers. This helps in transparency of operations and also makes a company more attractive to new investors.
CGI highlights that good corporate governance, regular board meetings, transparent and correct decision making can also improve a company’s reputation and image, making it into one which attracts public trust.
CGI states that primary aspects that define corporate governance include;
Clear division of responsibilities at the top, primarily that the position of chairman of the board be separated from that of chief executive and that there be a strong independent element on the board; that the majority of the Board be comprised of non-executive directors; that remuneration committees for board members be made up of the majority of non-executive directors; and that the board should appoint an audit committee including at least three non-executive directors.
Corporate governance regulates the relationship between the organisation, shareholders, directors and the executive management team.
In Jamaica corporate governance rules fall in line with Jamaica Stock Exchange standards, the Securities Act and the Companies Act.
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