Corporate Governance: How Much Should You Care About It?

By Aideen Hopkins

Truthfully?  A lot. Certainly more than you might think.

Corporate governance is a vital aspect of successful business building.  When it is overlooked or underdeveloped, it can create cracks that can fracture a company’s stability at the first sign of upheaval.  Following on from Marie’s article on the importance of boards, I felt it was a great opportunity to highlight the role and impact of corporate governance.  I really wanted to outline why it is so crucial for senior leadership and managers to understand the value of good corporate governance, how to make sure it is most effective for your organisation and how it is integrated with your board of directors.

What is Corporate Governance?

At its core corporate governance is a set of good practices and processes by which a company is operated, directed and managed.  It creates a balance of purpose between the interests of shareholders, management, stakeholders and the wider community. At EER, the introduction and management of good corporate governance has bolstered our development and given us the framework to pursue new strategic goals including company acquisitions, geographical expansion and service improvements.  It also gives us the security and stability to be as ambitious as we need to be!

How to Ensure Effective Corporate Governance

As with most things in business, and in life, the more effort and thought you put into your organisation’s corporate governance the more you will get out of it.  Good corporate governance will outline a vision, identify the best strategy to bring that vision to life and fuel the capabilities of the senior leadership who will take responsibility for implementing the strategy.  Despite the ‘process’ nature of corporate governance it is essential for effective company growth and development, enabling the business to improve its performance, reduce risks and facilitate stable expansion.

• Good governance should be a cultural mind-set, not just a set of tick boxes
• Good governance should professionalise the way your business operates, from top to bottom
• Good governance should unlock new opportunities
• Good governance should turn your employees into an engaged source of knowledge
• Good governance should invite scrutiny and challenge egos
• Good governance should ask the questions leaders least want to answer

The Role of the Board in Corporate Governance

As a member of the GCC Board of Directors Institute, a co-owner and board member of EER, I have seen from all sides the impact that boards can have on a company’s corporate governance, and vice versa.  If you are setting out on your journey to, or sparking a restructure of, corporate governance then you need to make sure that your first step is centred on a clear idea of purpose and roles.  These should include:

• Ensuring the values and vision of an organisation reflect its purpose and can be easily understood by all stakeholders
• Outlining a clear, engaged strategy for the company’s leadership team and growth objectives
• Consistently maintain effective and engaged communication with internal and external stakeholders
• Identify benchmarks to measure performance and operational efficiency against relevant best practices
• Foster a pattern of transparence and public reporting to build confidence amongst stakeholders
• Set up oversight safeguards to alert the board to any risk or compliance issues as well as missed obligations from the board itself

The Impact of Poor Corporate Governance

Still not sure why effective corporate governance is so important?  When it fails, it can have devastating results on a company’s ability to withstand obstacles, meet client requirements and achieve strategic objectives.  The most common causes of corporate governance failure are:

• Corruption or Fraud
• Unqualified board members
• Unethical leaders
• Inefficient internal accountability

If you can’t take the steps to prevent these issues, or others like them, then you risk creating the following issues:

• An unstable organisational structure
• Loss of stakeholder confidence and shareholder trust
• Challenges for raising capital
• Decreased client satisfaction
• Reduced revenue

These types of problems can be catastrophic for an organisation, particularly in the long term.  They are, however, entirely preventable if the correct steps are taken at the outset of your corporate governance planning process.

If you have any questions on the topic of corporate governance or would like to discuss any corporate services that EER could assist with or our bespoke corporate governance packages, please get in touch on +971(0)4 421 1819 or info@eerme.com.