Does bad corporate behavior lead to poor financial outcomes? Corporate governance failures have been easy to spot in recent years, with business headlines dominated by corporates that have failed to ensure that they are run according to robust rules, guidelines and business strategies. With companies held under much more scrutiny by their various stakeholders – not just limited to owners and shareholders, but also extending to their employees, the general public and the country like Malaysia, it is imperative that relevant rules and regulations are adhered to.
Good governance is not when a business makes a ‘right’ decision. Good governance is when a business ensures that there is a good decision-making process in place. Without good governance, an organisation lacks policies and procedures to ensure accuracy, consistency of information and responsiveness to key stakeholders including customers, shareholders and regulators. This cause the bad practices to kick in and will soon create a disaster.
Governance is the process by which the board;
1) ensures that the organisation complies with all legal and constitutional requirements;
2) sets strategic direction and priorities aligned with company’s vision and mission;
3) sets high-level policies and management performance expectations;
4) characterises and oversees the management of risk internally and externally;
5) monitors and evaluates organisational performance;
The 6 Steps model to ensure governance effectiveness;
Step 1: Get the right people on board
The first step is to get the right people on board. Without the right skills and attributes present among its directors, any board will struggle to deliver good governance. Get the right and capable leaders to sit at the top management and follow with getting right people to execute the tasks.
Step 2: Define and agree role and responsibility
Once the right people are on board, there needs to be agreement about exactly what is their role in the company, either as board members, top management or employees, there must be delegation and empowerment given in order for them to perform.
Step 3: Employ the right CEO and COO of the company.
Recruitment should be carried out carefully to ensure the right fit. Clearly define the policies that he or she can apply their skills and authority without having to ask permission from the board to do the job that they are employed to do and to avoid abuse of power from happening.
Step 4: Provide strategic leadership
A statement of strategic direction or strategic plan makes clear on what is to be achieved.
Step 5: Sets strategic direction and priorities
Business Plan must be aligned with the organisation performance management to ensure that progress can be monitored closely and there is availability of check and balance.
Step 6: Strong Corporate Governance in place
Risk Management are equally importance as business management. All departments and employee must embrace good governance as part of their work etiquette and culture.
Do get in touch with Q3 Management Solutions for the management and governance support, and this could be the beginning of a long-term business relationship. Email us at email@example.com.