04/10/2019
The Main Constituents of Good Corporate Governance are:
• Role and powers of Board: The foremost requirement of good corporate governance is the clear identification of powers, roles, responsibilities and accountability of the Board, CEO and the Chairman of the Board.
• Legislation: A clear and unambiguous legislative and regulatory framework is fundamental to effective corporate governance.
• Code of Conduct: It is essential that an organization's explicitly prescribed code of conduct are communicated to all stakeholders and are clearly understood by them.
• There should be some system in place to periodically measure and evaluate the adherence to such code of conduct by each member of the organization.
• Board Independence: An independent board is essential for sound corporate governance.
• It means that the board is capable of assessing the performance of managers with an objective perspective.
• Board Skills: In order to be able to undertake its functions effectively, the board must possess the necessary blend of qualities, skills, knowledge and experience so as to make quality contribution.
• It includes operational or technical expertise, financial skills, legal skills as well as knowledge of government and regulatory requirements.
• Management Environment: Includes setting up of clear objectives and appropriate ethical framework, establishing due processes, providing for transparency and clear enunciation of responsibility and accountability, implementing sound business planning, encouraging business risk assessment, having right people and right skill for jobs, establishing clear boundaries for acceptable behaviour, establishing performance evaluation measures and evaluating performance and sufficiently recognizing individual and group contribution.
• Board Appointments: To ensure that the most competent people are appointed in the board, the board positions must be filled through the process of extensive search.
• A well defined and open procedure must be in place for reappointments as well as for appointment of new directors.
• Board Induction and Training: Is essential to ensure that directors remain abreast of all development, which are or may impact corporate governance and other related issues.
• Board Meetings: The forums for board decision making.
• These meetings enable directors to discharge their responsibilities.
• The effectiveness of board meetings is dependent on carefully planned agendas and providing relevant papers and materials to directors sufficiently prior to board meetings.
• Strategy Setting: The objective of the company must be clearly documented in a long term corporate strategy including an annual business plan together with achievable and measurable performance targets and milestones.
• Business and Community Obligations: Though the basic activity of a business entity is inherently commercial yet it must also take care of community's obligations.
• The stakeholders must be informed about the approval by the proposed and ongoing initiatives taken to meet the community obligations.
