How to Tell if a Company Observes Good Governance
Whether you are a proprietor or into trading stocks, it pays to know if your company is observing good governance. Good governance pertains to the procedures followed by an organization for making decisions and taking actions.
As a proprietor or business owner, you should be able to conduct business affairs with utmost sense of responsibility and integrity. Financial rewards are but secondary, when you closely adhere to ethical and moral standards.
As a trader, you need to go for a company that does not budge to the noises of the market and does not make sudden shifts just to please the public. A good company must be able to perform well in the long-term.
Good governance is a lot more than just compliance and high figures. It is a culture of consistency, transparency, fairness and effectiveness. It sets the pace for everyone and every department in the organization, and seeks to prevent management from committing fraud, being too risk averse or too risk prone.
A company with good governance therefore exhibits making sound decisions, ensuring balance of different critical factors and interests.
It recognizes that although risk means reward, there are risks that should not be taken to protect the interests of stakeholders.
It puts more weight on long-term performance, rather than short-lived successes and erratic trends.
It gears towards motivating workers rather than breathing down employees’ necks every time.
A company with good governance is not as fickle as the market but holds steadfast to ethical standards.
It considers the differing stakeholders, and make sure that competing interests are reconciled if not neutralized the best way possible.
Acronyms of Good Governance
To better remember the principles of good governance, it pays to note the acronym: CRAFTED – consistency, responsibility, accountability, fairness, effectiveness, and deployed.
These principles are then applied to the LOGIC of good governance: learning, oversight, guidance, information and culture. The LOGIC of good governance aims to incorporate both the structural and behavioral aspects of governance.