Clients often ask me what’s the ROI on corporate governance; i.e., how does good corporate governance affect “the bottom line”? Good corporate governance can improve operational performance. It’s not just a compliance system, it’s the philosophy of governing the organization through proactive management from the top down. Good corporate governance transcends basic governance practices (legal and regulatory compliance, ongoing financial scrutiny, and fulfilling accountability requirements). Proactive boards plan for the future, evolve to keep pace with changes in the external environment, cultivate and create key external relationships, and recognize opportunities to grow the business.
Want to get started on proactive corporate governance? Here are two practices I recommend.
Customized governance programs designed with step-by-step implementation plans that include board orientation, coaching, and support set up a board to succeed. Organizations should be wary of boilerplate governance policies and processes, and instead have their governance frameworks tailored to meet their specific needs. It is paramount that companies have solid governance frameworks in place, with informed directors and officers who are trained to understand what governance is, why it is important, and how to use it to discharge their fiduciary duties, and fulfill their supervisory and management obligations.
Organizations can utilize governance audits to monitor and improve their governance practices. Governance audits include a thorough review of the existing policies and processes and a report to the board on the overall governance health of the company. The purpose of the report is to provide an assessment of the organization’s current state of affairs that the board can rely on to proactively identify and effectively mitigate risk. Having an independent outside consultant perform the audit ensures an objective review of the policies and processes. A fresh set of eyes can often spot weaknesses and identify risks that someone within the company may not be able to see due to their vantage point. The deluge of shareholder activism in 2012 is top of mind with boards. Governance audits are increasingly being utilized to provide not only valuable insights, but also some peace of mind.
Danielle is the founder and president of GovernancePro Corporate Services Inc., a board advisory firm based in Calgary, Alberta. For over a decade, she has provided professional governance advice, education, and support to various for-profit and not-for-profit organizations. Danielle’s hands-on experience in the boardroom (as both a director and governance officer), legal background, and formal education in management consulting enable her to fully understand a business, crafting tailored solutions that increase board effectiveness and safeguard compliance.
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