Given the news recently, it is obvious that all too frequently corporations either accidentally or by design have failed to act properly. This has jeopardized the entire financial community and the total economy. Investment is crucial for the economy to function correctly. What is needed clearly is a strong board of directors, one that withstands the scrutiny of regulators within the organization and supervision by the government.
Entailed should be an appropriate, well-functioning board, one that should meet frequently, routinely every month or so. It then could provide a unique perspective from outside the corporation itself.
With a good board the corporation can get instant credibility, whether meeting with banks, customers, or shareholders. Needless to say, furnishing objective facts, will help the corporation stave off restrictive legislation triggered by corrupt practices. Perhaps of equal importance, this corporate governance would mean an "extra set of eyes". Canada's major accounting firms usually offer corporate governance service as part of their consulting work, but that has not worked very well, as the accounting firm is not anxious to upset management.
Hence, it is prudent for businesses to have good corporate governance structures in place. Internal financial oversight, risk management problems, and strategic perspectives can be furthered by a good board.
When businesses need to raise money for expansion, lenders usually want to see the strategic proposal.
Having governance structures in place is an advantage in sorting out management problems and in making future plans.
Some corporations opt for an advisory board, but that does not have the same clout of accountability as a formally constituted board of directors.
As a background, it should be noted that too often boards of directors are composed of well-known celebrities, perhaps retired politicians, who sit on other boards as well. Unfortunately, the custom is for boards to meet only once a month.
Frequently directors just ''sit'' It has been said that Hillary Clinton, who was a director on several boards, was one of the few such members who did the required homework and were thoroughly immersed in the affairs of the company on whose boards they were directors. Those failures are a sad indictment.
Many of the mistakes/corruption that have taken place would have been avoided by a good board, one that can supply a tremendous benefit to a corporation.
