Corporate governance is at the heart of the successful running of an organisation. It not only improves the overall performance, but also promotes trust among the shareholders and other stakeholders.
It is important that companies/organisations strive to follow good corporate governance practices. To assist, we set out below what we consider to be 8 key components:
1. Governance Frameworks
Governance frameworks can often be overlooked, however, they are the bedrock of how a company/organisation is governed and should be designed so as to ensure:
2. Governance Documentation
It is imperative that governance documentation is accurate and kept up to date. These documents establish the rules by which the business is governed, set out the rights and obligations of the shareholders/owners, and provide evidence for regulators/stakeholders of the governance processes/procedures in place.
3. Policies in line with law and applicable regulations
Policies and guidelines are important because they address pertinent issues, such as rules and principles for day-to-day operations. They ensure compliance with laws and regulations, reflect the culture of the organisation, give guidance for decision-making, risk appetite and streamline internal processes. These policies and guidelines should be current and in line with legislation/regulations as well as with the goals and strategy of the organisation. Additionally, these should be made easily available to ensure that everyone understands the way things should be done and how they are expected to behave.
4. Documenting processes and procedures
It is important that governance processes/procedures are adequately documented. Often a company/organisation has good corporate governance practices, however, have gaps in terms of documenting the actual processes/procedures in place.
5. Effective board reporting
Boards perform best when they receive good quality reports that contain sufficient information for them to make well-informed decisions and to develop business strategies for short and long-term growth and overall sustainability of the organisation.
In our experience, the challenges for management in preparing fit for purpose reports for the board include the following:
6. Agenda and minutes
It is imperative that the board deals with the most pressing/important strategic matters at meetings, therefore, we find that by grouping items together under headings and by putting routine items together for simultaneous approval by the board will ensure that agenda time can be best utilised during the meeting.
Given that board minutes are the definitive record of a company’s highest decision-making body, we consider it to be crucial that the quality of those minutes is of the highest standard and that they are clear, concise and free from ambiguity.
At a minimum, minutes should include:
7. Director training and board evaluations
Directors need to ensure they keep up to date with regulations and legislation, which can prove challenging. Additionally, increased responsibility and expanding regulatory demands means higher expectations for board performance.
We set out below common issues identified from board evaluations:
8. Subsidiary governance policies
Subsidiaries are a common feature of today's business structures, as corporations operate across multiple jurisdictions and business areas. To ensure that corporate governance principles are cascaded, consistently and effectively down to its subsidiaries and that subsidiary boards are aware of their responsibilities, it is important that such organisations:
If you have any queries in relation to the above, please do not hesitate to reach out to your usual PwC contacts, or a member of the Entity Governance & Compliance team.