What is ‘Corporate Governance’?
The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company – these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
Corporate Governance in the UK The UK’s principles-based approach to corporate governance, and the ability for companies to ‘comply or explain’, continues to deliver strong and effective governance and ensures the UK governance regime is valued and respected, importantly by both companies and investors.
Who is responsible for directing corporate governance?
Corporate governance is the responsibility of both companies and investors: companies are required to demonstrate they are acting in the interests of their shareholders; and investors need to demonstrate they are acting in the interests of their clients. Under the framework of the Code for companies and the Stewardship Code for investors, the UK is a world leader. But governance is not simply about codes or regulations; it is about relationships and trust. This is embodied in the non-prescriptive nature of the UK’s flexible and strong governance framework, ensuring that the corporate governance regime in the UK supports companies of all sizes.
It is never too early for companies, even those that remain privately held, to begin establishing appropriate corporate governance policies and procedures. For example, meeting investors’ expectations early in an IPO process, engaging with the investment community on corporate governance related decisions and maintaining open dialogue only serves to enhance investors’ and other stakeholders’ confidence.