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What is Corporate Governance?

In business, reputation is everything.

Fortunes can be made or broken depending on how other people view the competency and values of your organisation, and how well you cooperate internally at your company.

This is where Corporate Governance comes in.

An essential aspect of the way that an organisation is managed, corporate governance is fundamental to the long term successful of a brand.

So, what exactly is it, and how can we make sure we’re doing it properly in our own boardrooms?

We decided to have a closer look at the subject here.

Sitting at desk

What is Corporate Governance?

Corporate governance describes the way that organisations are controlled, managed and led, usually by a board of directors. If you want to get even more technical, it’s a term that’s used to refer to the structures and processes that determine how organisations are governed and by whom. It’s an essential aspect of how companies can achieve their long-term aims and goals.

In most cases, organisations will be governed by and controlled by boards of directors – effectively, a committee of senior leaders in a company. This board will be responsible for making all of the key decisions about how a company is run.

For the CIPD, one of the UK’s most respected human resources and learning and development membership organisations, effective corporate governance “..involves supervising the management of a company, managing risks and identifying opportunity, so that business is done competently, with integrity and with due regard to the interests of all stakeholders. It embraces regulation, structure, good practice and board ability.”

Corporate governance requires a company board to balance the needs of a huge range of stakeholders, from employees and customers, through to shareholders, suppliers and the wider community. It’s a complicated subject that calls for a range of different soft and hard skills to perform it well: from interpersonal, confidence and influencing skills through to an understanding of legislation, processes and best practice management principles.

According to Investopedia, the basic principles that should inform corporate governance include:

● Accountability
● Transparency
● Fairness
● Responsibility
● Risk Management

There are also legal responsibilities that organisations are expected to follow when it comes to corporate governance (we expand on these below)

Why is Corporate Governance important?

Corporate governance is essential to the long-term performance of a company.

In recent years, there has been a gathering focus in society on ethics, transparency and best practice when it comes to the way that businesses and organisations are managed, particularly since the 2008 Global Financial Crisis. Legislation has been introduced by governments around the world, including the UK, in order to standardise (to some extent) the way that companies are governed and tighten up professional standards and conduct.

Customers, shareholders, employees and stakeholders are basing many of their decisions as market actors on how organisations are governed.

When you get corporate governance wrong, the results can be disastrous. High profile failures in corporate governance, like the 2008 Lehman Brothers bankruptcy and 2015 Volkswagen emissions scandal, have permanently damaged brand and industry-wide reputations, and lost shareholders billions.

When you get corporate governance right however, the benefits can be wide-ranging and spectacular. Best practice corporate governance builds transparency and trust with a range of stakeholders, improving their confidence in your long-term sustainability as an organisation, and ultimately contributing to higher revenue, better profit margins, improved employee loyalty and better navigation of risks. It can also improve resilience, your long-term sustainability and offer internal and external stakeholders a clear idea of the values of your company.

Investing in corporate governance is also a great way to improve the strategic position of your organisation, helping you to identify potential risks and find potential opportunities for growth too.

With all this in mind, it’s clear that companies really need to be paying attention to corporate governance and investing in it at an organisation if they’re serious about professionalism and long-term growth over short-term gain.

A grey skyscraper,  looming overhead, photographed from the bottom.

How is Corporate Governance delivered?

Following high profile failures that have ended up costing taxpayers and shareholders huge amounts of money, governments around the world have laid down legislation about corporate governance to ensure that standards can be managed and maintained more efficiently. In the UK, legislation like the Companies Act 2006 sets out the legal requirements for decision-making at an organisation and the penalties for not following the law.

Best practice advice such as UK Corporate Governance Code has also been created, allowing companies to access clear, wide-ranging guidance on how they should be governing their companies – and what boards should be doing to ensure that.

This means that when it comes to ensuring your organisation is governed correctly, ignorance isn’t an excuse.

There is also another way that organisations can ensure that they are leaders in corporate governance: making sure that their board members have the right training in governance and corporate management. One of the most efficient and cost-effective ways to do this is by studying a specific qualification in the subject.

Corporate Governance qualifications

So, as you can probably tell, corporate governance can be a tricky field to navigate unless you know what you’re doing.

And, believe it or not, statistics suggest that most directors and board members at an organisation currently don’t have a formal qualification in corporate governance.

The Corporate Governance Institute, one of the leading corporate governance, professional membership bodies in the UK, believes that less than 1% of board members across the world have an accredited qualification in the subject. That’s an astounding figure when you consider the gravity of the situation and the stakes at play in terms of legal and financial penalties, not to mention reputational risk, for not being as clued up on corporate governance as you could be.

In the UK, the Corporate Governance Institute is one of the leading bodies responsible for maintaining standards, as you can probably guess from the name, in corporate governance. It does this through providing world-leading qualifications in the subject and providing ongoing training and career development to directors and board members of companies.

At ICS Learn, we’ve recently launched a range of governance qualifications from the Corporate Governance Institute for you to improve your own professional development and support the implementation of best practice governance at your own organisation.

We currently offer two specific qualifications relevant to corporate governance: the Diploma in Corporate Governance and the Diploma in Environmental, Social and Governance.

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Diploma in Corporate Governance

The Diploma in Corporate Governance is ideal if you’re an aspiring director, current director or someone who engages with governance on a regular basis. It’s comprehensive and designed to give you a high-level awareness of best practice corporate governance, and how to engage with boards successfully.

Split into 11 modules, you’ll study topics such as:

● Introduction to Corporate Governance
● Governance Architecture
● The Governance Handbook
● Reporting
● The Company Director
● Culture
● Strategy
● Financial Matters
● risk
● Evaluating Performance
● The Non-Executive Director (NED)

Diploma in Environmental, Social and Governance

This qualification is perfect if you're a current director, aspiring director, or a board member looking to understand the unique opportunities that Environmental, Social and Corporate Governance can offer your organisation.

It's focused on equipping you with the right skills and tools to be able to apply relevant ESG frameworks to your own company and, by the end of the qualification, you'll be able to confidently build, apply and maintain ESG strategy across many different business areas.

The modules you’ll study include:

● The history of ESG
● The ESG landscape
● ESG investing
● The role of the board and ESG
● ESG and business strategy
● ESG and risk
● ESG and data
● Corporate governance and ESG
● ESG reporting
● Leading a sustainable transformation

Develop your corporate governance skills today

From influencing everything from long-term financial stability through to employee, stakeholder and shareholder behaviour, corporate governance is essential aspect of your organisation, so it’s time to take it seriously. We hope this blog has introduced you to corporate governance and why it’s so important to get right.

Develop your corporate governance skills with a professional qualification that you can complete from anywhere. Download your free CGI course guide today.