Fantastic leadership is fundamental to the success of any business. From the business world, leadership may take many forms, and it is frequently changing and evolving with the demands of workers, shareholders, and customers. In order to make sure that a company can develop a good leadership structure that can also responsively adapt to failures or success, many investors and owners discover that a focus on corporate governance is necessary.
What is Business Governance?
Business governance is the complex set of structures and places used to restrain a company. This typically includes functions for officers, directors, a board, and shareholders. Through a business governance structure, owners and engaging members may detail the rights and responsibilities of different positions of authority in a company and ensure that their business governance is in conformity with existing state and federal criminal and civil laws.
In the aftermath of several high-profile cases involving fraud and corruption within corporate entities, there has been a growing focus on good corporate governance and how to enforce such governance via the use of national and international legislation. In response, many notable accountability mechanisms have been established that try to provide best practices and processes for corporate governance, while also creating enforcement mechanisms to deal with the undesirable acts of officers, directors, and shareholders.
There are the 3 major sources of business governance principles widely followed today. These contain the Cadbury Report, the Principles of Corporate Governance, and the Sarbanes-Oxley Act. These 3 sources have a lot of common goals that they try to establish through good business governance. These include:
- Ensuring that companies respect the rights of shareholders and manage them equal treatment;
- Comprehensively specifying the functions and responsibilities of a corporate board;
- Ensuring that officers and board members act with integrity and ethically;
- andPromoting disclosure and transparency among corporations.
Basics of business governance also promote inner regulation instead of external punishment in the kind of lawsuits or penalties. This includes awarding the board of supervisors the power to track the actions of the company, including the ability to hire or fire individuals who could be causing problems, and conducting regular board meetings to talk about problems as they appear. Similarly, corporations are recommended to routinely conduct internal auditing procedures as well as providing avenues for whistleblowers to alert corporations of concerns and protections to whistleblowers so that they aren't retaliated against.
Despite the best efforts of all involved, problems with business governance do arise, whether because of institutional inadequacies that prevent appropriate supervision or bad acts by different celebrities. While this comes to pass, and people are hurt because of this, a variety of laws allow for corporations as well as their directors and officers to be sued.
One of the strongest laws regulating corporations and their governance is your Sarbanes-Oxley Act, which requires corporations to execute specific procedures, such as supplying disclosure of financial struggles and requiring executive officers to fully review financial statements. If corporations and their officers fail to abide by the governance requirements of the law, they may be investigated, fined, and otherwise punished for these inadequacies.If business governance issues lead to corruption or fraud in international markets, corporations and their officers may also find themselves liable under anti-corruption laws, like the Foreign Corrupt Practices Act and the UK Bribery Act. These Acts impose harsh penalties on corporations for engaging in corruption, and the government has been proven to enforce millions of dollars in penalties when corporations have been found guilty.
Ready to Find out More?
For counsel who can effectively guide you through difficult business decisions and who can fight for you when disputes arise, turn to the Law Offices of Charles R. Frazier. To schedule a low cost consultation, call 615-267-0125.