Ethical Corporate Governance

Corporate governance facilitates effective management of a company to ensure its long-term success. This article explores the importance of implementing ethical corporate governance, protecting the interests of customers, stakeholders, employees, and the public at large.

What Is Corporate Governance?

Corporate governance is an operational system by which companies are controlled and directed.

A company is governed by its board of directors. Shareholders appoint directors and auditors to establish the appropriate governance structure. The board’s responsibilities include setting strategic aims and providing the necessary leadership to put them into effect. Directors are responsible for managing the business and reporting to company shareholders.

Corporate governance is distinct from routine operational management. It directs the activities of the company board and sets the value of the company.

In many countries, legal regulations dictate corporate governance code, establishing accounting rules and standards for listed companies. Nevertheless, good corporate governance is about more than simply meeting legal requirements. Over the last few years, the term “corporate governance” has increasingly been used to describe issues relating to accountability and governance issues reaching beyond the corporate sector.

Corporate governance is about improving accountability and transparency within existing systems. Numerous academic studies have revealed that companies that embrace effective corporate governance strategies outperform their rivals in commercial terms. To learn how companies benefit from effective corporate governance, view the attached infographic.

Why Is Ethical Corporate Governance So Important?

Ethical corporate governance has become something of a buzz phrase these days, with virtually every company seeking to achieve it. But what exactly is ethical corporate governance, and how can we really be sure that a company practices what it preaches?

All companies exist primarily to create a product or fulfil a service which can be used to generate profit. For corporate governance to be ethical, this intention must be balanced with controls ensuring that business operations do not transgress into behaviour that could be construed as unethical or immoral.

FDH Financial Holdings founder Dr Thomson Mpinganjira will be well aware of the benefits of implementing ethical corporate governance throughout his companies. FDH Bank implements rigorous corporate social responsibility strategies, giving back to communities throughout Malawi. Find out more about charitable causes supported by Dr Thomson Mpinganjira’s companies by viewing the attached PDF.

Corporations represent some of society’s most important institutions and dominant organisations. Some corporations exert economic power and societal influence to rival that of an entire nation. Multinationals like Apple and Google wield phenomenal power, overseeing massive global supply chains and distributing products and services all over the world. Therefore, it is vital that these organisations operate ethically, implementing corporate governance that is principled, honest, and fair.

In the past, companies have looked to leverage their market position in order to inhibit competition, in some cases even threatening local populations. Ethical corporate governance effectively stops this from happening.

Ethical corporate governance is a multifaceted issue with many complex layers, but the crux of the issue is accountability, i.e. transparency, fiduciary duty, and mechanisms of control and auditing.

In recent years, the business world has seen a marked shift in approach to corporate governance. Whereas traditionally companies may have been ‘out for themselves’, extracting maximum profit for minimum outlay irrespective of third-party consequences, the advent of the internet age has had significant ramifications in terms of corporate identity.

In a world of social media and viral posts, where the public always gets the last say, multinational organisations are forced to take their environmental and social responsibilities more seriously, weaving them into their business agenda and operating in a more ethical way.

Find out more about the benefits of ethical business practices by viewing the attached video.