Although unseen by the public, the practices and the systems of rule that control a company’s framework have a direct effect upon the public’s image of the company. Investors and shareholders are members of the public, but this is a small group when compared to the pool of customers who interact with the employees at the operations level.
As a business lawyer in Los Angeles, I can affirmatively state that ineffective processes at the top are made known through the actions and the attitude of the employees.
This blog will address how effective corporate governance will carry through to those outside of the company: namely, shareholders, vendors, and customers.
It is the responsibility of all board members to establish a balance between the varying interests that create a company’s success and value. The framework for a company to achieve its objectives and market share comes from its governance. This governance must include internal controls, action plans and a standardized method of measurement.
This begins at the board level. It is the role of the board and the individual directors to seek and practice the appropriate checks and balances to avoid abuse and fraud from within. This important work needs to remain in compliance with the ever-changing regulations imposed by the Securities and Exchange Commission, the stock exchanges and Congress.
The Pillars of Corporate Governance
Corporate behavior is controlled by its governance. Although shareholders and investors have little control over a company’s direction, these stakeholders take this matter seriously. Governance that is consistent and effective will lead to an increase in value as these financial stakeholders continue to build trust in the company.
In addition to the company’s public image is the communication of its effective governance. This communication needs to be made public via the company’s website through public and investor portals.
For the public portal, the community relations tab should include the:
- Corporate Leadership Team
- Executive Officers
- Managers and Key Employees
- Social and Environmental Concerns
It will be important to speak to sustainable practices and community outreach initiatives. The actions need to be aligned with the concerns.
For the shareholder portal, the investor relations tab should include the:
- Board of Directors
- Corporate Committee Chairs and Members
- Governance Documents
- Bylaws and the Articles of Incorporation
- Guidelines for Stock Ownership
The Board and Corporate Governance
The directors have the responsibility of representing all stakeholders of the company. The Board has a direct effect on the policies for the appointments of corporate officers, dividends paid to the shareholders, and the compensation paid to the directors.
The public policies are those of accountability, transparency, risk management and the behaviors behind the social, environmental, and ethical practices. The directors need to lead by example when it comes to these policy decisions and mandates.
It is good policy for a corporate board to be diverse. This diversity needs to represent the makeup of the community and the target customers. The board members need to be both internal and external to the company to oversee the necessary checks and balances.
Ineffective Governance
A company’s recovery from a damaged reputation is hard. Often, recovery is never fully achieved. The most common error of a company is the communication without the actions to support the policies.
The executive team and the employees must be trained to be the public face to effectuate transparency, community outreach and sustainable practices. The policies and the procedures initiated at the operations level must align with the framework established at the board level.
The mandates of the board of directors cannot go unfunded. When the investors and the public begin to lose confidence, the value of the company will decrease. The measurable value of profit will be negatively affected, as will the non-cash measurements of ethics, transparency and social awareness.
The tangible and intangible aspects of the bottom line are monetized to determine the overall value of a company.
Have Questions or Need Advice on Corporate Governance?Contact an experienced business lawyer in Los Angeles today such as the Hakim Law Group.
The Hakim Law Group stands ready to help corporations, small business owners and entrepreneurs. Ourteam of skilled and highly reputable business lawyers have worked in top-tier international law firms and have served as general counsel to major companies. This high level of diverse legal and business experience is paramount to our boutique approach—which produces efficient, responsive and, ultimately, more effective results. For further information or to schedule an appointment with a leading business lawyer in Los Angeles, please contact HLG at 310-993-2203 or visit www.HakimLawGroup.com to learn more.`
