Corporate governance is central to your business’s operations and overall market success. Not only is it legally required to have a working structure in place, but it also outlines the way reporting, responsibility, and other vital matters are handled within the company. There are many issues to keep in mind when structuring your corporate governance plan, each of which has various ethical, operational, and legal implications.
Accountability
Among the first is accountability. Making sure you have a solid accountability system in place is key to minimizing liability and preserving your company’s integrity. Your governance system must include reporting structures that hold all parties on all levels of leadership accountable for their actions.
Ultimately, all within the company are held accountable to your shareholders and the public as a whole. In situations where one part of the company isn’t kept accountable, they could put the entire corporation in jeopardy.
Financial Transparency
Honesty is absolutely vital to successful operations, particularly when it comes to the company’s finances. What your leaders do with your resources should be accurately reported, and complete records must be kept in order to preserve legal stability. Inflating numbers or false reporting may result in legal entanglements, lost reputation, and fewer investors.
Strict measures should be put in place in order to ensure compliance with the highest standards in financial reporting. There are many laws that set forth standards for how financial reporting should work, so keeping those laws in mind will be a key part of developing reporting structures.
Ethics
Both accountability and transparency are aspects of ethics, but corporate ethics encompass more than just the financial side of your company. Included also are the environmental and social impacts the company has on the community. Causing harm to the environment, discriminating against certain parties, or utilizing substandard operational models are just a few ways in which a company can violate ethical standards.
These types of violations may or may not have legal implications as well. At the very least, they can deter investors and tarnish the company’s image in the eyes of the general public.
Efficiency
While a company must maintain an effective structure for reporting and transparency, it must operate efficiently. Too often will layers of bureaucracy impede decision-making within a company, leaving key issues unresolved and slowing progress to an exasperating crawl. Reporting methods should be structured in a way that enables quickness and clarity, ensuring that the decision-making bodies in the company are able to make solid choices backed by current data.
Legal Compliance
Each of the above-mentioned issues involves some aspect of law—many of them are governed by federal and state regulations. For instance, the Securities and Exchange Commission (SEC) sets standards for companies that have publicly tradeable securities. Adherence to their standards is absolutely vital to minimizing liability and ensuring full compliance with the law.
Another example is the vast body of employment laws that businesses must observe. Structures for internal advancement and workplace management must comply with federal and state standards.
Given the strong legal aspect of corporate governance, retaining general counsel is the most secure way to make sure your business’s governance plans are well-structured and fully compliant with ethical and legal standards. Hart David Carson LLP provides those services, so contact us today for the legal counsel you need.