CORPORATE GOVERNANCE: More structure and Less conflict
By Danielle Santoro Chaia
In the times we are living today, in Brazil and throughout the world, terms such as management, conflict, corporate governance and transparency are in vogue. To sound more ‘modern’, one might say that they are among the ‘trending topics’ (a digital age expression that, followed by the symbol “#”, means hot topic of the moment, the one most people are talking about) in discussions, news items and media around the world.
But what is corporate governance? Where does it come into effect? How can good corporate governance improve a company?
In the general sense, corporate governance refers to the way a company is run and organized, which involves the relations between the shareholders, board of directors, management, independent auditors and the fiscal council. Thus, by adopting good practices, the company can get good results.
According to the Brazilian Institute of Corporate Governance (IBGC) there are 4 basic principles that underpin Corporate Governance, as follows:
- transparency in business management
- accountability for what goes on in the business
- fairness towards all the stakeholders, and
- corporate responsibility that looks to the longevity and sustainability of the organization.
If these principles are closely followed, the way a company is run can only bring internal and external benefits, thereby enhancing the value of the organization in the eyes of its internal and external stakeholders and of the market itself. A well-managed company captures the attention of stakeholders, creating interest and the appreciation of investments. The company will quickly gain a positive reputation in the market and consequently increase the number of investors – becoming a key player on the corporate stage.
There are numerous advantages to good corporate governance and we can cite some of the more direct ones:
- Increase in intangible assets and the stock of human capital
- Greater synergy within the group
- Transparency, sustainability, respect and credibility
- Reduced risk in the succession process, and
- Greater control and stability for the business.
In sum, one can say that good corporate governance is focused on value creation and the sustainability of the business.
It is important to note that the best corporate governance practices strengthen the business structure and help to minimize potential conflicts over corporate control, because its purpose is to protect the interests of all the parties, preserving the company and its position in the market. And it is clear is that poor or a lack of corporate governance is likely to disrupt and hinder the development of the organization and jeopardize its sustainability.