We have seen in our various blogs that management and governance is always important if you want your organisation to succeed. It is important that people working in a company work together as a team and towards a common goal that contributes to the overall development of the organisation as well as an all round development for all the people involved. This is where Corporate Governance comes in.
Organisations or corporations are usually huge with varied types of employees and various projects being carried out simultaneously. It is therefore, difficult to manage or govern it all without a proper, defined system in place.
Corporate governance, according to Wikipedia includes the mechanisms, processes and relations by which corporations are controlled and directed. This lets an organisation perform smoothly and efficiently and reach its full potential and at the same time makes sure that the entire process isn’t hugely exhaustive or cumbersome.
No one wants corporate scandals. They spread far and wide and sparks interest in public as well as political forums. The company’s popularity and its path to glory takes a hit due to infamy and even though more people know about its existence now, this publicity is definitely the bad kind of publicity- something which all business honchos would try very very hard to avoid.
The reason why the practices gained huge popularity suddenly and exponentially was due to the collapse of a number of multimillion corporations at the beginning of the 21st century with accounting fraud being the most common reason behind these downfalls. Automatically, people frantically began searching for ways to cover their grounds from the very get go, so as to avoid huge financial crises or even bankruptcy. This need was further fuelled by the recently occurred financial crisis of 2008.
So what exactly is the purpose of establishing Corporate Governance methods in an organisation?
- It makes sure that the rights and responsibilities of each entity in the corporation are suitably distributed so as to avoid any discrepancies or invoke a sense of discrimination among the participants. Entities could be the board of directors, stakeholders, auditors, managers, etc., basically anyone who has a role to play in making the corporation flourish.
- As it has been discussed above, corporate governance helps a company to achieve its goals and ambitions by providing a particular framework for the same.
- It covers almost all spheres of management-action plans, internal controls, the works.
- It dictates corporate behaviour, meaning that it specifies how much control and power an entity has, to what extent it can be exercised and in what way.
- Lays down the rules and procedures for decision making activities related to corporate affairs.
- It monitors the actions, policies, practices, etc., of the corporations and its stakeholders.
- Mitigates the conflict of interests between the various stakeholders.
The process of governance doesn’t necessarily have to be manual. In fact, in this time and age, it is rarely done completely manually and without any sort of interference by a machine or a software. Tools like VComply make governance easier by ensuring that the person in control (manager, project head, CEO, etc.) knows exactly what is going on in the organisation and which employee is doing what and how. This simplifies the governance in a company to a great extent and at the same time increases the efficiency and effectivity of the entire process.
As the name suggests, corporate governance includes all of the company’s management and governance activities and it is no longer just a passing fad- it is a reality, an idea that everyone wants to get behind. So hop on to the bandwagon and make corporate governance more efficient, simplified and more effective so that your corporation isn’t left behind.
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