The Benefits of Good Corporate Governance

13 Jun 2023

Establishing and maintaining good corporate governance is an important step for any business. This article explains the benefits of good corporate governance and its impact on a company’s long-term success.

Corporate governance refers to the system of rules, practices, and processes by which a company is directed, controlled, and governed. It ensures that the company is run in a responsible, ethical, and transparent manner, and that it is accountable to its shareholders, stakeholders, and society.

Both private and public organisations should adhere to sound corporate governance rules. Due to the additional legal and regulatory requirements, good corporate governance and its disclosure is crucial for public companies that are listed on stock markets. Under the Australian Securities Exchange Ltd. (ASX) Listing Rules, a listed entity is required to produce a corporate governance statement that discloses the extent to which it has followed the recommendations set by the ASX Corporate Governance Council. This statement must also be disclosed in its annual report or its website.

The ASX has specific requirements regarding board governance of companies listed on its exchange, such as composition and responsibilities of the board of directors, their roles and responsibilities, the decision-making processes, Board meetings and communication, Board evaluation, ethical standards and conduct and stakeholder engagement. Good corporate governance can bring several benefits to a company.

1. Builds trust and confidence

One of the primary advantages is that it helps to build trust and confidence among investors, employees, customers, and other stakeholders. When a company has a strong corporate governance framework, it is seen as a more reliable and trustworthy organisation. This, in turn, can help to attract and retain talented employees, investors, and clients.

2. Mitigate risks

Further, good corporate governance helps to mitigate risks and protect the company from potential legal and reputational damage. By establishing clear policies and procedures for decision-making, risk management, and compliance, a company can minimise the chances of wrongdoing, fraud, or other forms of misconduct.

3. Improves overall performance of company

Good corporate governance can improve the overall performance of a company. By setting clear goals and objectives, establishing effective management systems, and ensuring transparency and accountability, a company can optimise its operations and achieve better results. This, in turn, can lead to higher profitability, better shareholder returns, and increased market value.

4. Promotes social and environmental responsibility

In addition, the significance of good corporate governance is important for the wider society. Companies have a responsibility to act in the public interest and by implementing sound governance practices, companies can help to promote social and environmental responsibility, respect for human rights, and ethical behaviour.

Overall, good corporate governance is essential for the success and sustainability of any business. It helps to build trust and confidence, mitigate risks, improve performance, and contribute to society. Finally, companies that prioritise good governance practices are more likely to attract and retain investors, customers, and employees, and achieve long-term success.

Contact us to learn more about how your company can benefit from implementing good corporate governance practices.

Contact BoardRoom for more information:

Tom Bloomfield

General Manager, Growth & Partnerships
+61 2 9290 9617