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Corporate Governance Direct Benefits

Corporate Governance Direct Benefits

 

Corporate Governance is the structure that characterizes the business connections that exist
between Company Shareholder, Management team, the Board of Directors, and all other key
Stakeholders. Corporate Governance makes organizations more responsible and Transparent to
Investors and gives them the devices to react to authentic stakeholder concern. It adds to
improvement and expanded admittance to capital energizes new Investments, supports financial
development, and gives business openings.
A lack of corporate governance can lead to profit loss, corruption and a tarnished image, not only
to the corporation, but to the society, or even worse will influence global as a whole. This form
of corporate governance management is also designed to limit risk and eliminate corrosive
elements within an organization.
The Direct benefits of Corporate Governance:
 Risk mitigation – An effective corporate governance framework helps to mitigate
risks, providing shareholders in non-listed companies with the comfort that although their
exits may be difficult, their interests will be safeguarded by the board and management. A
good governance framework will also induce reflection on exit strategies, giving additional
comfort to prospective shareholders deciding whether to invest in the company.
 Improved capital flow – An increase in confidence by investors and banks in the
company due to robust financial management reporting will not only improve access to
capital, but also minimise both cost of capital and cost of equity, resulting in an optimised
capital flow. Deciding on an appropriate capital structure is thus a key element of good
corporate governance. Transparency, especially regarding everything of interest to
investors, will command a lower risk premium, therefore lowering the cost of capital and
equity.
 Reputational boost – Transparency in a company’s internal policies, control
mechanisms and how it deals with its suppliers, vendors, media, staff and government
bodies will boost its reputation and thus its brand value.
 More effective, better decision-making – Good corporate governance also aims
at a faster decision-making process by establishing a clear delineation of roles between
owners and management.
 Improved reporting – Improved reporting on performance in turn leads managers and
owners to make more informed and fact-based decisions, leading ultimately to improving
sales margins and reducing costs.
 Focus on compliance – Good corporate governance will adequately rest on policies
requiring the company to stay compliant with local laws and regulations; it will synchronise
risk management and compliance to ensure the company has proper control mechanisms,
meets its objectives and operates efficiently in terms of people, processes, technology and
information.

 Higher staff retention – An increase in staff retention and motivation can be
expected, especially from senior staff, when the company has a well-defined and
communicated vision and direction. A focus on the company’s core business will also make
it easier to penetrate the market and attract the interest of shareholders. Additionally,
millennials – now the largest single group on the labour market in many countries – tend to
rank an organization’s commitment to responsible business practices highly in their
employment choices.
 Limitation of disruptive behaviour and conflicts of interest – By
establishing rules to reduce potential fraud and malpractices amongst employees; and
avoiding conflicts of interest namely through minority shareholders being given their share
of voice by being represented by independent directors.

Truth Economic and Management Consultancy has an accumulative Experience in Conducting
Corporate Governance Manual and Systems for all type of Companies including Private and
Public Joint Stock Companies.

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