Post by account_disabled on Mar 4, 2024 1:20:57 GMT -6
The organization, as well as the control and direction of companies, is essential for it to function and have a good relationship with all its stakeholders. So to achieve this, you first need to understand what corporate governance is.
Nowadays, more investors and stakeholders focus on this set of standards and principles to evaluate the quality of corporate entities, so below we share what it consists of.
What is corporate governance?
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. It essentially involves balancing the interests of a company's many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government and the community.
Because corporate governance also provides Chile Mobile Number List the framework for achieving a company's objectives, it encompdonkeyes virtually all spheres of management, from action plans and internal controls to performance measurement and corporate disclosure.
André Durán Martín, governance lawyer, told Entrepreneur that sometimes it is believed that corporate governance only applies to large companies or family organizations, but the reality is that any type of company requires a structure, controls, agreements and a direction. definite.
This structure must be a system that monitors and evaluates how a board of directors manages and supervises the operations of a company. And it is based on aspects such as:
Pay accounts.
Transparency.
Security.
The productivity.
The competitiveness.
The integrity.
Corporate governance is about what a company's board does and how it sets values, and should be distinguished from day-to-day operational management.
Institute of Chartered Accountants of England and Wales.
Therefore, it includes the processes by which objectives are set and attempted to be achieved, seeking to ensure that the donkeyociation not only meets its goals but also guarantees and supports the trust of the interested parties.
In this sense, it is understood as the tools that allow those in charge of decision-making to effectively confront the problems that administration entails.
How is corporate governance formed?
Corporate governance can be integrated in different ways, this depends on the company, but there are some areas that are essential, such as the following:
Board of Directors
The board of directors is the main direct stakeholder influencing corporate governance. Directors are elected by shareholders or appointed by other board members and represent the company's shareholders.
The board is tasked with making important decisions, such as appointments of corporate officers, executive compensation, and dividend policy. In some cases, the board's obligations extend beyond financial optimization, such as when shareholder resolutions call for certain social or environmental concerns to be prioritized.
Management or senior management
It is the group of people responsible for implementing strategic planning, risk management and financial information, it is made up of managers or department heads, who are coordinated by the CEO.
investors donkeyembly
Shareholders' meeting, as its name indicates, is made up of entities that have invested capital within a corporation, which seek to obtain benefits from it.
Principles of corporate governance
Due to the constant changes in social, political and economic aspects, more and more companies are paying attention to what corporate governance is, an example of this are the principles established for this tool, stipulated by the Business Roundtable :
The board is responsible for approving corporate strategies that aim to create long-term sustainable value, as well as supervising the work and results obtained by senior management. In addition to establishing the ethical operating parameters.
Management or senior management will be responsible for developing and executing the corporate strategy and operating the business. Likewise, he will be the one who produces the financial statements, as well as the results, showing the areas of opportunity to investors.
The board, through its audit committee, will have control of analyzing the company's situation, from compliance programs to risk management, relying on reports from external auditors.
The nominating committee of the board of directors has the role of composing committed and diverse governance, appropriate to the purposes and objectives of the organization.
Both the board of directors and management must collaborate with shareholders to address issues that affect value construction and business purpose.
To consolidate sustainability when making decisions, the board of directors may consider the interests of everyone who has a relationship with the company, whether they are employees, customers, suppliers and even communities.
Who needs it and what does it benefit?
Entrepreneurs who start a business or who have been with it for some time can benefit from corporate governance, only it must be adapted to the organization, adapting its needs and characteristics.
benefits of corporate governance
Having corporate governance generates order among business partners, helping them achieve clarity in:
The definition of your business model.
The development of your corporate image.
The delimitation of your market.
The improvement of their products or services, among other strategic issues that will allow them to create solid foundations.
In addition, according to the Mexican Institute of Fiscal and Business Expansion (IMEFI), benefits such as:
Equal treatment and protection of all interested parties.
External recognition of its performance, stability and social validity.
Transparency in administration due to access to information.
Strengthen the strategic vision and maintain supervision over business activities.
Be able to identify and control the risks to which the company may be exposed.
Have a declaration of ethical principles and corporate social responsibility.
Prevent illicit operations and conflicts of interest.
Comply with both government and social regulations.
The above causes a dynamic of accountability, getting the partners to talk formally, topics that are normally taken “for granted”, among which are: the responsibility of each one in the company, the percentage of the profits that will be distributed and reinvested, the amount of capital that each must contribute or the reason why they want to donkeyociate.
Likewise, it is important that corporate governance is a priority, since it establishes the “rules of the game”, generating in the business:
A clear delimitation of the responsibilities of each interested party.
Clear guidelines on the position of each member in the organization.
A professional image among your clients, suppliers, collaborators and anyone.
Periodic and organized meetings to know the results of the organization and measure its growth.
A long-term plan, allowing partners to align themselves towards the same direction to make more and better decisions focused on strengthening and growing.
Understanding what corporate governance is will serve to build a more transparent, organized and profitable organization, no matter the size or sector of your company.
Examples of corporate governance
Enron y Worldcom
According to investopedia , public and government concern about corporate governance tends to wax and wane. Often, however, highly publicized revelations of corporate malfeasance revive interest in the topic.
For example, corporate governance became a pressing issue in the United States in the early 21st century, after fraudulent practices bankrupted high-profile companies such as Enron and WorldCom.
The problem with Enron was that its board of directors waived many rules related to conflicts of interest by allowing Chief Financial Officer (CFO) Andrew Fastow to create private, independent companies to do business with Enron. What really happened was that these private partnerships were used to hide Enron's debts and liabilities, which would have significantly reduced the company's profits.
What happened at Enron was clearly a lack of corporate governance that should have prevented the creation of these loss-hiding entities. The company also had a corporate atmosphere that had dishonest people from the top (Fastow) down to its traders making illegal moves in the markets.
What is corporate governance statistics
Both the Enron and Worldcom scandals resulted in the pdonkeyage of the Sarbanes-Oxley Act in 2002, which imposed stricter record-keeping requirements on companies, along with stiff criminal penalties for violating them and other securities laws. The goal was to restore public confidence in public companies and how they operate.
PepsiCo
It is common to hear examples of poor corporate governance, mainly because it is the reason some companies blow up and end up in the news. It is rare to hear about companies with good corporate governance because it is good corporate governance that keeps them out of the news since no scandal has occurred.
One company that has always practiced good corporate governance and seeks to update it frequently is PepsiCo. In drafting its 2020 proxy statement, PepsiCo took input from investors to focus on these areas:
Composition, diversity and renewal of the board and leadership structure.
Long-term strategy issues.
Corporate purpose and sustainability.
Good governance practices and ethical corporate culture.
Human capital management.
Discussion and compensation analysis.
Shareholder and stakeholder engagement.
The company included in its proxy statement a side-by-side graphic depicting the current leadership structure, showing a combined chairman and CEO along with an independent presiding director, and a link between compensation and the "Win" vision with purpose” of the company and changes in the executive compensation program.
As already mentioned, having a well-established internal organization will help improve results and growth.
Nowadays, more investors and stakeholders focus on this set of standards and principles to evaluate the quality of corporate entities, so below we share what it consists of.
What is corporate governance?
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. It essentially involves balancing the interests of a company's many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government and the community.
Because corporate governance also provides Chile Mobile Number List the framework for achieving a company's objectives, it encompdonkeyes virtually all spheres of management, from action plans and internal controls to performance measurement and corporate disclosure.
André Durán Martín, governance lawyer, told Entrepreneur that sometimes it is believed that corporate governance only applies to large companies or family organizations, but the reality is that any type of company requires a structure, controls, agreements and a direction. definite.
This structure must be a system that monitors and evaluates how a board of directors manages and supervises the operations of a company. And it is based on aspects such as:
Pay accounts.
Transparency.
Security.
The productivity.
The competitiveness.
The integrity.
Corporate governance is about what a company's board does and how it sets values, and should be distinguished from day-to-day operational management.
Institute of Chartered Accountants of England and Wales.
Therefore, it includes the processes by which objectives are set and attempted to be achieved, seeking to ensure that the donkeyociation not only meets its goals but also guarantees and supports the trust of the interested parties.
In this sense, it is understood as the tools that allow those in charge of decision-making to effectively confront the problems that administration entails.
How is corporate governance formed?
Corporate governance can be integrated in different ways, this depends on the company, but there are some areas that are essential, such as the following:
Board of Directors
The board of directors is the main direct stakeholder influencing corporate governance. Directors are elected by shareholders or appointed by other board members and represent the company's shareholders.
The board is tasked with making important decisions, such as appointments of corporate officers, executive compensation, and dividend policy. In some cases, the board's obligations extend beyond financial optimization, such as when shareholder resolutions call for certain social or environmental concerns to be prioritized.
Management or senior management
It is the group of people responsible for implementing strategic planning, risk management and financial information, it is made up of managers or department heads, who are coordinated by the CEO.
investors donkeyembly
Shareholders' meeting, as its name indicates, is made up of entities that have invested capital within a corporation, which seek to obtain benefits from it.
Principles of corporate governance
Due to the constant changes in social, political and economic aspects, more and more companies are paying attention to what corporate governance is, an example of this are the principles established for this tool, stipulated by the Business Roundtable :
The board is responsible for approving corporate strategies that aim to create long-term sustainable value, as well as supervising the work and results obtained by senior management. In addition to establishing the ethical operating parameters.
Management or senior management will be responsible for developing and executing the corporate strategy and operating the business. Likewise, he will be the one who produces the financial statements, as well as the results, showing the areas of opportunity to investors.
The board, through its audit committee, will have control of analyzing the company's situation, from compliance programs to risk management, relying on reports from external auditors.
The nominating committee of the board of directors has the role of composing committed and diverse governance, appropriate to the purposes and objectives of the organization.
Both the board of directors and management must collaborate with shareholders to address issues that affect value construction and business purpose.
To consolidate sustainability when making decisions, the board of directors may consider the interests of everyone who has a relationship with the company, whether they are employees, customers, suppliers and even communities.
Who needs it and what does it benefit?
Entrepreneurs who start a business or who have been with it for some time can benefit from corporate governance, only it must be adapted to the organization, adapting its needs and characteristics.
benefits of corporate governance
Having corporate governance generates order among business partners, helping them achieve clarity in:
The definition of your business model.
The development of your corporate image.
The delimitation of your market.
The improvement of their products or services, among other strategic issues that will allow them to create solid foundations.
In addition, according to the Mexican Institute of Fiscal and Business Expansion (IMEFI), benefits such as:
Equal treatment and protection of all interested parties.
External recognition of its performance, stability and social validity.
Transparency in administration due to access to information.
Strengthen the strategic vision and maintain supervision over business activities.
Be able to identify and control the risks to which the company may be exposed.
Have a declaration of ethical principles and corporate social responsibility.
Prevent illicit operations and conflicts of interest.
Comply with both government and social regulations.
The above causes a dynamic of accountability, getting the partners to talk formally, topics that are normally taken “for granted”, among which are: the responsibility of each one in the company, the percentage of the profits that will be distributed and reinvested, the amount of capital that each must contribute or the reason why they want to donkeyociate.
Likewise, it is important that corporate governance is a priority, since it establishes the “rules of the game”, generating in the business:
A clear delimitation of the responsibilities of each interested party.
Clear guidelines on the position of each member in the organization.
A professional image among your clients, suppliers, collaborators and anyone.
Periodic and organized meetings to know the results of the organization and measure its growth.
A long-term plan, allowing partners to align themselves towards the same direction to make more and better decisions focused on strengthening and growing.
Understanding what corporate governance is will serve to build a more transparent, organized and profitable organization, no matter the size or sector of your company.
Examples of corporate governance
Enron y Worldcom
According to investopedia , public and government concern about corporate governance tends to wax and wane. Often, however, highly publicized revelations of corporate malfeasance revive interest in the topic.
For example, corporate governance became a pressing issue in the United States in the early 21st century, after fraudulent practices bankrupted high-profile companies such as Enron and WorldCom.
The problem with Enron was that its board of directors waived many rules related to conflicts of interest by allowing Chief Financial Officer (CFO) Andrew Fastow to create private, independent companies to do business with Enron. What really happened was that these private partnerships were used to hide Enron's debts and liabilities, which would have significantly reduced the company's profits.
What happened at Enron was clearly a lack of corporate governance that should have prevented the creation of these loss-hiding entities. The company also had a corporate atmosphere that had dishonest people from the top (Fastow) down to its traders making illegal moves in the markets.
What is corporate governance statistics
Both the Enron and Worldcom scandals resulted in the pdonkeyage of the Sarbanes-Oxley Act in 2002, which imposed stricter record-keeping requirements on companies, along with stiff criminal penalties for violating them and other securities laws. The goal was to restore public confidence in public companies and how they operate.
PepsiCo
It is common to hear examples of poor corporate governance, mainly because it is the reason some companies blow up and end up in the news. It is rare to hear about companies with good corporate governance because it is good corporate governance that keeps them out of the news since no scandal has occurred.
One company that has always practiced good corporate governance and seeks to update it frequently is PepsiCo. In drafting its 2020 proxy statement, PepsiCo took input from investors to focus on these areas:
Composition, diversity and renewal of the board and leadership structure.
Long-term strategy issues.
Corporate purpose and sustainability.
Good governance practices and ethical corporate culture.
Human capital management.
Discussion and compensation analysis.
Shareholder and stakeholder engagement.
The company included in its proxy statement a side-by-side graphic depicting the current leadership structure, showing a combined chairman and CEO along with an independent presiding director, and a link between compensation and the "Win" vision with purpose” of the company and changes in the executive compensation program.
As already mentioned, having a well-established internal organization will help improve results and growth.