Types of Corporate Governance

A clearly defined corporate governance structure encourages fairness and transparency, which helps your business to build strong relations with its shareholders as well as the local community. It helps identify the roles and responsibilities, guarantees accountability and enables compliance with laws and regulations. It also assists in implementing a company’s growth strategy over the long term by aligning the interests of shareholders with the interests of the board and management.

There are many different types of corporate governance, but the one that works best for you is based on the goals of your company and its the culture of your company. Keep in mind the following essential concepts:

Unitary Board Structure

In this corporate governance system the board of directors is accountable for overseeing and making decisions regarding company activities. The board is made up of nonexecutive and executive directors. This structure is common in mid-sized to small businesses.

Continental Model

A two-tiered structure, the Continental model gives control to a management board as well as a supervisory board. The management board is comprised of insiders from the company including managers and executives. The supervisory board is composed of outsiders, like bankers and union representatives who have stakes in the company.

Governance that is based on stakeholder engagement

This type of governance structure, unlike traditional structures which prioritize shareholder interests, is a holistic approach that considers all stakeholders, including employees, customers and vendors as well as the community. It encourages boards of directors to adopt policies that address environmental and social issues and develop relevant engagement programs. The board must be transparent and transparent about its decision-making processes and communicate this information to all stakeholders. It is also important to ensure that there is a clear line of communication between the management, the board and shareholders.

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