Nowadays the properly organized work of the company provides it with a stable position in the market. To ensure this efficiency, the Corporate Governance Guide was organized.
What is the Corporate Governance Guide?
When choosing an object for investment, investors pay attention not only to financial indicators but also to how their interests will be protected. In this case, the corporate governance of the company can increase its attractiveness, and the lack of a clear structure of corporate relations, on the contrary, can reduce it. In addition, it is not uncommon for large companies to face serious risks and lose their market positions due to insufficient attention to corporate governance issues. What principles should a company follow to avoid such risks and strengthen its position? What is the role of the Corporate Governance Guide?
Adequate and effective corporate governance is very often seen as a critical component of comprehensive support aimed at providing boards of directors with long-term sustainable value for shareholders and stakeholders.
The concept of corporate governance covers the complex of relations between the company’s management, the board of directors, shareholders/owners, and other interested parties. Corporate governance defines the mechanisms by which the owners of the company exercise control over the management to maximize the profit and value of the company. There is no single corporate governance model that works in all companies. At the same time, there are certain standards applicable in a wide variety of legal, political, and economic contexts.
The Corporate Governance Guide defines the basic views and guidelines that must be followed for the company to ensure and strengthen the effectiveness of corporate governance. The governance guide begins with a set of initial corporate policies. These policies are used to create MVP (Minimum Functionality Product) management that follows best practices.
Basic principles of Corporate Governance Guide 2021
There is a set of fundamental principles of corporate governance: fairness, transparency, honesty, and accountability. The implementation of corporate governance involves several stages:
- separation of strategic and operational leadership. The transfer of business management functions from the owner to the management allows the owner to focus on more ambitious strategic tasks for the development of his business;
- organization of the work of the board of directors and management. An effective corporate governance system ensures that the motivation of members of the board of directors or top managers of the company is adjusted to comply with the interests of the business owners. As a rule, the overall financial result of the company suffers seriously from the imbalance of interests in the direction of management, since each manager is responsible only for his field of activity of the company, without seeing the big picture;
- introduction of financial and managerial transparency. The operational reporting system built following the international standards allows the company to “predict” the financial result before the end of the financial year and make the necessary decisions in time to achieve the best result. In the absence of international reporting, the company’s management works blindly, and the owner sees an unexpected result of the company’s work for a year;
- determination of the factors of the company’s value. Managers of a company must think like owners, for this their remuneration must be linked to their actions that contribute to creating value. Cost factors are measured using KPIs, which include, for example, capacity utilization, customer retention rates, gross margins, warehouse costs, shipping costs, etc. The motivation of individual employees must be tied to the key performance indicators for which they are responsible.