There may appear to be no rules in business other than making money at all costs, but there is a method to its madness. While any for-profit organization's primary goal is to make money, each one is governed by its own set of standards and practices.
Corporate governance is the term for these standards and practices, and they will have an impact on your project. It's easy to become myopic when managing a project and focus solely on the project's success.
What Is Corporate Governance?
A system of rules, practices, and processes used by a corporation to direct and control its actions is known as corporate governance. It's a way to strike a balance between different corporate entities like stakeholders, management, customers, suppliers, financiers, the government, and the community.
Consider corporate governance as a framework for achieving an organization's goals and objectives. Given the bigger picture, it's easy to see how corporate governance isn't just a top-down concern, but something that affects every aspect of a business. Action plans, internal controls, OKRs, performance measurements, and corporate disclosures are all part of this.
Roles in Corporate Governance
Shareholders will have a significant impact on corporate governance decisions if it is defined as a set of rules, controls, policies, and resolutions that govern corporate behavior. However, governance entails much more. The board of directors of any organization is the ultimate arbiter.
Shareholders elect the board of directors, or other board members appoint them to represent the shareholders. Important decisions, such as appointing corporate officers and deciding on executive compensation and dividend policy, are among their responsibilities. When it comes to social or environmental issues, however, their responsibilities go beyond the financial.
The board of directors is made up of insiders and independent members, with insiders being major shareholders, founders, and executives. The independents do not have the same ties to the company as the employees, but they do have experience managing or directing large corporations and can provide a broader context for decision-making.
Employees, customers, suppliers, communities, and shareholders are all considered by the board of directors when making decisions. The board of directors is not a management team and is not involved in the day-to-day operations of the company. They are, however, in charge of corporate governance's two pillars: oversight and planning.
However, the board of directors has the authority to delegate some responsibilities to board committees, which have the time and resources to delve deeply into issues that require expertise. The findings of these committees will be reported to the board of directors on a regular basis.
Need more insights on the same? Go through an effective PMP prep session today!
Comments