"Reigning the Boardroom: A Trailblazing Guide to Corporate Governance Success": GoodMan, #1

By Patrick Mukosha

"Reigning the Boardroom: A Trailblazing Guide to Corporate Governance Success" is an invaluable resource for anyone seeking to navigate the intricate landscape of corporate governance in today's rapidly changing business world. It offers a forward-looking perspective on governance that aligns with the demands of an ethical, transparent, and strategically-driven business environment.

 

"Reigning the Boardroom" stands out for its ability to bridge theory with practical application. The author's extensive experience in corporate governance brings an authenticity to the text, and the inclusion of real-world case studies and best practices further enriches the content. The book's approachable style and reader-friendly structure make it accessible to a wide audience, from seasoned governance professionals to those new to the field.

• Language: English
• Publisher: Patrick Mukosha
• Release date: Aug 8, 2023
• ISBN: 9798223601807

Patrick Mukosha

Patrick Mukosha is an ICT & Management Consultant. With 15+ years of IT experience, he's passionate about all things ICT. He also loves to bring ICT down to a level that everyone can understand. His works have been quoted on Academia by Researchers and ICT Practitioners (www.academia.edu). He has a PHD and MBA from AIU, USA, BSc(Hons) ICT, UEA, UK, Dipl, CCT, UK. He's a founder of PatWest Technologies.

Book preview

Chapter 1:  What is Corporate Governance?

Depending on the writer's objectives, corporate governance may be defined, described, or characterized in a variety of ways. Writers who are interested in a particular discipline or setting (such as accounting, finance, law, or management) frequently utilize constrained definitions that seem to have a single purpose. Broader structural descriptions are frequently used by authors who are concerned with regulatory policy in connection to corporate governance procedures.

Corporate governance is a comprehensive description that incorporates numerous commonly used definitions: it describes the processes, structures, and mechanisms that influence the control and direction of corporations.  This broad definition includes both the specific context-dependent narrow definitions and the generally accepted as authoritative broader descriptions. The Cadbury Report's structural definition of corporate governance, which refers to it as the system, is one of the latter.

The relational-structural view adopted by the Organization for Economic Cooperation and Development (OECD) states that Corporate governance involves a set of relationships between a company's management, its board, its shareholders, and other stakeholders. These latter definitions include the structural definition from the Cadbury Report, which defines corporate governance as the system by which companies are directed and controlled (Cadbury 1992, p. 15). Corporate governance also offers the framework through which the goals of the organization are established, together with the methods for achieving them and determining performance metrics (OECD 2015, p. 9).

The goal of corporate governance, according to the OECD, is to contribute to the creation of the confidence, transparency, and accountability needed to promote long-term investment, financial stability, and commercial integrity, promoting stronger growth and more inclusive societies. In order to promote global trade and economic growth, 38 nations make up the Organization for Economic Co-operation and Development (OECD), an intergovernmental organization.

It is a forum whose member nations affirm their commitment to democracy and the market economy. It offers a venue for policy comparison, the search for solutions to shared issues, the identification of best practices, and the coordination of national and international policies among its members.

The author will use the OECD definition of corporate governance for the duration of this book.

Corporate governance, in its simplest form, describes how and why businesses are governed. It indicates who is in charge, who is responsible, and who makes choices. In essence, it serves as a toolkit for management and the board to deal with business difficulties more skilfully. Corporate governance makes sure that organizations have the proper controls and decision-making processes in place to balance the interests of all parties involved (shareholders, employees, suppliers, customers, and the community).

The processes used to create and pursue a company's goals in the context of the social, regulatory, and market environments are included in corporate governance. It is focused on procedures and methods to try to ensure that a business is run. The Institute, which is the birthplace of good governance, thinks that it is crucial because it provides the framework for enhancing the calibre of business managers' decisions. Making high-quality, moral decisions helps firms become sustainable and improves their ability to produce long-term value.

Corporate governance is the set of laws, customs, and procedures that govern how an organization operates. Corporate governance generally entails striking a balance between the needs of all of a company's various stakeholders, including shareholders, senior management, clients, suppliers, financiers, the government, and the local community. Corporate governance, which includes almost every aspect of management from action plans and internal controls to performance assessment and corporate transparency, serves as the framework for achieving a company's goals.

Things to Keep In Mind:

Corporate governance is the framework of laws, customs, and procedures used to lead and manage a corporation.

The board of directors of a company is the key factor determining corporate governance.

Accountability, transparency, fairness, responsibility, and risk management are the fundamental tenets of corporate governance.

Poor corporate governance can raise questions about a company's operations and ultimate profitability.

Corporate governance encompasses environmental awareness, ethical behaviour, corporate strategy, compensation, and risk management.

Corporate governance, in a nutshell, is the set of laws, customs, and procedures that regulate and control a business.

1.1.  Principles in Corporate Governance

The three texts published since 1990—The Cadbury Report (UK, 1992), the Principles of Corporate Governance (OECD, 1999, 2004 and 2015), and the Sarbanes-Oxley Act of 2002 (US, 2002)—have become common references in debates of corporate governance today. The papers from Cadbury and the Organisation for Economic Co-operation and Development (OECD) outline general guidelines for how corporations should conduct themselves in order to ensure good governance. The Sarbanes-Oxley Act, sometimes known as Sarbox or Sox informally, is an effort by the federal government of the United States to enact legislation that adheres to a number of the guidelines suggested in the Cadbury and OECD reports:

The Board's Role and Responsibilities: The board must have the necessary knowledge and expertise to evaluate and question management performance. Additionally, it needs to be the right size and have the right amounts of independence and dedication.

Rights and Fair Treatment of Shareholders: Businesses should respect shareholders' rights and assist them in exercising such rights. By successfully and freely disseminating information and encouraging shareholders to attend general meetings, they can aid shareholders in exercising their rights.

Transparency and Disclosure: Organizations should make its board and management's duties and responsibilities clear to the public in order to keep stakeholders accountable. They should also put measures in place to independently check and protect the accuracy of the business's financial reporting. To make sure that all investors have access to clear, factual information, disclosure of material matters pertaining to the organization should be balanced and made in a timely manner.

Interests of Other Stakeholders: Businesses should be aware of their obligations under the law, contracts, society, and the market to non-shareholder stakeholders, such as employees, creditors, suppliers, local communities, customers, and policymakers.

Integrity and Ethical Conduct: When selecting business leaders and board members, integrity should be a core necessity. Organizations should create a code of conduct that encourages directors and executives to make morally righteous decisions.

1.2.  What Constitutes a Governance Structure's Core Elements?

The framework for an organization's roles, duties, and decision-making procedures is known as its governance structure. It offers the platform for putting the governance principles listed in the governance framework into practice.

A governance structure's essential elements often consist of:

Figure 1: Governance structure's essential elements.

Note: Depending on the type and scale of the organization, its legal structure, and the particular sector or industry in which it works, the elements of a governance structure can change. However, these crucial elements serve as the cornerstone of efficient governance, ensuring that the company runs with openness, responsibility, and a strategic focus.

1.3.  Exactly Why Is Corporate Governance Crucial?

Because it establishes a set of guidelines and procedures that control how a business runs and how it aligns with the interests of all of its stakeholders, corporate governance is crucial. Financial viability is a result of ethical business activities, which are a result of good corporate governance. That may then draw investors.

Thus, corporate governance refers to the governing principles that a business establishes to guide every aspect of its operations, including compensation, risk management, and employee treatment, as well as reporting unfair practices and managing environmental impacts. A company's decision-making is influenced by its corporate governance, which encourages ethical behaviour. For investors, it may highlight a prospective investment. A company's breakdown caused by poor corporate governance frequently results in scandals and bankruptcy.

The set of regulations, checks, policies, and resolutions put in place to regulate corporate behaviour are particularly referred to as governance, as may be inferred from the information provided above. In governance, a board of directors is essential. Shareholders and proxy advisors are significant stakeholders with influence over governance. An important aspect of community and investor relations is communicating a company's corporate governance. For instance, the board of directors and management team of Apple Inc. are described on the company's investor relations website. It offers information on corporate governance, such as committee charters and governance papers including bylaws, rules for stock ownership, and articles of incorporation.

The majority of businesses aim for excellent corporate governance. Simply being profitable is not sufficient for many shareholders. Additionally, it must exhibit excellent corporate citizenship by consideration for the environment, moral behaviour, and efficient company governance.

Corporate Governance's Advantages

A rise in share prices can be attributed to good corporate governance.

Corporate governance may give investors and stakeholders a clear picture of a company's direction and commercial integrity. It also helps to foster trust with the community and public officials.

The following are some of the advantages of Corporate Governance:

Transparency and Accountability: Corporate governance encourages