Why Is It Important For Companies To Have A Good System Of Corporate Governance In Place?

Corporate governance is the corner stone of any good business. It encompasses the processes, practices and policies that a company relies on to make formal decisions and to manage the company. The Oxford University Press Business English Dictionary defines corporate governance as the "way in which directors and managers control a company and make decisions, especially decisions that have an important effect on the shareholders." The concept of corporate governance is becoming increasingly important in companies.

At a quick glance, good corporate governance will ensure that the board of directors meet regularly, retain control over the business and are clear in the division of their responsibilities, as well as maintaining a system of risk management. The company secretary will be responsible for duties such as ensuring that board procedures are followed and that all pertinent rules and regulations are abided by. They must also ensure the company keeps Companies House up to date with any necessary filings. Corporate governance can encompass many more duties, although the system of governance will often vary from company to company.

Employing good corporate governance helps the company to regulate risk and reduce the opportunity for corruption. Often, scandals and fraud within a company become more likely where directors and senior management do not have to comply with a formal governance code. The board should meet regularly, retain control over the business and monitor those in management, to enable it to see how the company is functioning. Furthermore, a good corporate governance scheme will make clear to every officer of the company, his or her duties and will encourage them to keep these duties in mind when making decisions.

Implementing an excellent corporate governance system will also ensure that the company protects its members, officers and management. By ensuring that the company retains its records in the company books and maintains its statutory registers, they will be protected. Maintaining these records also means that officers of the company can be held accountable through...