The following is a guest post for The Monitor written by Maureen DeCicco, CPA, partner in the New Brunswick office of the consulting and accounting firm WithumSmith+Brown. She has 18 years of public accounting experience and five years in private industry accounting and internal audit.
Whether your company is large or small, good corporate governance can be critical in establishing a positive organizational culture. Good corporate governance is evident by responsibility, accountability, consistency, fairness and transparency. It can financially benefit an organization, leading to higher profit margins, greater dividend yields and larger stock repurchases. Setting corporate governance procedures in place also enhances the organization’s reputation and builds integrity, making it more attractive to customers and investors.
The following are some simple tips for developing good corporate governance:
- Document governance principles. When documenting a set of corporate governance principles, the roles and functions of the Board and its committees should be established.
- Document committee charters. All committee charters should outline a committee’s authority as to decision making and their roles and responsibilities. This creates accountability.
- Within charters, a well defined plan for dealing with governance issues and resolution of issues should be communicated.
- An audit committee should monitor public accounting firm audit work, their independence, fees and level of services and scope of both audit and non audit services.
- A compensation committee should address remuneration levels for executive officers, fringe benefit and incentive plans.
- The corporate governance committee should make recommendations to the board for new members, and monitor the board performance.
- The corporate governance committee should monitor committee and executive management performance.
- Have independent members on the audit committee, including a financial expert.
- Minutes should be taken at all meetings and committees should report formally to the board on a regular basis.
- Employee code of conduct policy should be documented and provided to employees.
- Board code of conduct policy for non-employee directors should be documented and provided to board members.
- Formalize employee performance evaluations.
- Employee complaint procedures should be made available to all employees. Employees should be made aware of non-retaliation policy and that they can be anonymous.
Following some of the basics of corporate governance demonstrates a good tone from the top, while creating transparency across all levels and in the firm’s operations. In light of the recent challenging economic times and the financial meltdown, exposing fraudulent activity is more important than ever. Good corporate governance will help to expose and correct any issues before becoming major problems.