What is Corporate Governance?

Corporate governance is a set of rules, principles, and procedures that regulate the structure and operation of a company’s governing bodies. This entails establishing relationships between the board of directors, the board of directors, the shareholders, and the rest of the parties, thus stipulating the necessary rules governing the company’s decision-making process.

Implementing good corporate governance practices can be an important driver of value creation in companies, as companies with sound governance systems tend to outperform their competitors financially.

Currently, the entry of new investors and foreign capital is necessary for the growth of companies and the generation of employment. Therefore, mechanisms to increase transparency about companies’ internal processes and governance bodies are more important than ever.

What is good corporate governance?

Applying a code of good corporate governance guarantees a company’s sustainable growth. It helps restore investor confidence, increases access to foreign credit, attracts talent, and boosts brand image. In short, progress in this regard makes companies more attractive at the business level, economically sustainable, and competitive.

Companies are an important element in the transformation and progress of society. There is a clear relationship between the good aggregate results of an economy and the correct management of all the companies operating in a country. For this reason, regulatory bodies have implemented a series of regulations and codes of good practice that seek to promote a balance between companies and society’s interests in general.

Today, having solid control and governance structures, together with a culture of transparency and accessibility of information, has become a key factor of competitiveness and an opportunity to gain confidence in the market. It also increases the positive impact of companies because it generates wealth in their environment and stability in the markets.

What advantages of good corporate governance?

Good corporate governance practices can be an important driver of value creation for companies. It is very important to increase transparency about internal processes and governance bodies. The direct benefits of this are as follows:

  • Access to financing: the integration of mechanisms for shareholder oversight and involvement, as well as the professionalization of the board of directors, encourages responsible corporate management and the formulation of long-term sustainable growth targets. This generates greater confidence in the market and among investors, who prefer to place their assets in companies that demonstrate sound corporate governance.
  • Value generation: good corporate governance increases companies’ profitability and value in the market, making them more attractive and positioning them better than their competitors.
  • Risk management: companies acquire more solid management structures, making decision-making more agile and effective. In addition, they are better prepared for any economic eventuality, both nationally and internationally.
  • Creation of synergies: the fact that a company’s business objective is associated with values or that they are attractive to work for increases its reputation. This allows the creation of more interesting synergies, guaranteeing its stability and projection in the market.
  • Benefits for the national economy: it increases foreign capital investment, contributing to financial development. In this way, it contributes to favoring growth and job creation within society.

What are the pillars of good corporate governance?

As with many other aspects of the business world, corporate governance practices should not conform to a single standard. However, a common objective is to establish agreements that avoid internal conflicts and ensure that the company’s information is presented transparently.

In this sense, the keys to good corporate governance management are as follows:

  • Analyzing corporate positioning: carrying out a diagnosis of the company’s current situation is fundamental. This helps to identify areas for improvement and increase the value and sustainability of the company’s activity.
  • Measure the effectiveness of internal control systems: they must be aligned with the main rules and standards of action in regulatory compliance and control based on prevention, detection, and response. Thus, board members and senior management recognize the new threats brought about by the digitalization of companies.
  • Improving corporate reporting: there is a growing trend for companies to take into account other types of non-financial information. Corporate reporting, it is thought, should give trend information as well as prioritize investments in big data, cloud computing, and data visualization tools.
  • Improve the security and protection of directors in the event of legal proceedings: in the USA, various laws have made the professional activity of directors more transparent, increasing the responsibilities required and the range of risks to which they are exposed.
  • Evaluating compliance with the board’s objectives: it is considered good practice for listed companies to carry out annual evaluations and, in addition, to draw up an action plan to correct any deficiencies detected. In this process, it is important to consider all elements of the board’s value chain, best practices in this area, and stakeholder expectations.
  • Ensure compliance with tax requirements: the board must decide on a tax strategy that responds to the authorities’ reporting requirements.
  • Supporting the creation of international standards: The standardization of corporate governance rules is intended to improve efficiency, stimulate and facilitate investments abroad and not result in a loss of resources. The areas related to the reporting function are the most affected by regulatory diffusion.

Good corporate governance codes

According to the latest online essay writer report on the Code of Good Governance of Listed Companies, the proper and transparent management of organizations is one of the essential factors for generating value in companies, improving economic efficiency, and reinforcing investor confidence.

In recent years in the USA, there have been notable advances in the area of good corporate governance. It is important to know that in the current framework of corporate governance of listed companies in our country, there are two levels:

  1. The mandatory rules: are those incorporated into the Capital Companies Act and other applicable legal provisions.
  2. The good governance recommendations: these are strictly voluntary, but American legislation does require that, when the recommendations set out in the Code are not followed, the organization must explain the reasons so that shareholders, investors, and the markets, in general, can judge this.

Both levels facilitate the measurement and auditing of good governance in organizations. The Code of Good Governance aims at a model of Corporate Governance that is increasingly more detailed and has documentary support in policies and procedures. In addition, it works on the accessibility by stakeholders to corporate information on procedures to comply in practice with the recommendations.

Find the leader you need!

In addition to these tips, choosing the right leader to implement all these measures is necessary. This person must have values that are aligned with the corporate culture and ensures compliance with the conduct of good governance.

In short, there is no good governance without a good leader. In this sense, transparency ensures adequate and timely disclosure of all matters relating to the company, including its financial situation, performance, ownership, and governance structure.

With the application of a code of good governance – executed by a good leader – reliability and security will make yours a recognized company, prolonging its success over time and improving its brand image and access to foreign markets.

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