Types of Corporate Governance
A clearly established corporate governance structure can promote fairness and transparency, helping your business to build strong relationships with its shareholders and the local community. It helps define roles and responsibilities, ensures accountability, and allows for compliance with the law and regulations. It also assists in the long-term growth of a business by aligning management and shareholder interests.
Corporate governance is a complicated concept that is dependent on the goals and culture of your business. The most important things to keep in mind are:
Unitary Board Structure
In this corporate governance model, the board of directors is responsible for making decisions and overseeing the company’s activities. The board includes both executive and non-executive directors. This type of structure is common in small and mid-sized companies.
Continental Model
A two-tiered system, called the Continental model gives control to a management board as well as the supervisory board. The management board consists of insiders within the company including managers and executives. The supervisory board includes outsiders, such as bankers and union representatives with stakes in the company.
Stakeholder-Oriented Governance
In contrast to traditional structures which focus on shareholder interests, this type of governance structure takes into account the needs of all stakeholders including employees, customers as well as vendors and the general public. It encourages boards of directors to adopt policies that address environmental and social issues and develop engaging programs that are meaningful. The board must be transparent about its decision-making process and make it available to all stakeholders. It is also important to ensure that there are clear lines of communication between the board, company management and shareholders.
