By Heinrich Mihe Gaomab II
CORPORATE governance has evolved over the past 100 years in the world as the key driver for effective and efficient business decisions. Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled.
A well-defined and enforced corporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the business or enterprises in any economy adheres to accepted ethical standards and best practices as well as to formal laws or legislation.
In recent ten years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate and public sector power and, in some cases, alleged criminal activity by corporate officers.
The failure of Corporate Governance has been aimed at the exercising of the role and the overall performance of the Board of Directors. Historically, the role of the Boards in corporate scandals and corporate sector in general seemed to have been generally overlooked.
Even when corporate governance was catapulted to the fore in 1980s, the focus was engrossed on the running of the companies that was targeted mainly at the CEO and its management. Therefore, it is no wonder that there was widespread “CEO bashing” and that the Boards remained unscathed despite the numerous investigations and actions taken against management and the organisations.
The topic of corporate governance, as it applies to Boards interested only a few. However, much attention and plenty of criticism was recently directed at the companies’ corporate Boards. Traditionally, Board responsibilities have been to oversee the company’s overall strategy, hire and monitor the CEO, scrutinise the performance of the company’s leadership team, oversee financial reporting and disclosure, and ensure compliance with laws and regulations.
It is only with the advent of the corporate scandals that the role of the Board in the creation of shareholder value and organisational effectiveness has been pushed to the fore. It is also increasingly becoming evident that organisations can create shareholder value through more effective corporate governance.
It is now increasingly clear that successful organisations must be headed by an effective and efficient Boards that can both provide strategic leadership, enforced governance and ensured accountability and control of the running of the company, institution or public bodies. It is abundantly clear that the Board is legally the highest authority and decision maker in any company and has a collective responsibility to provide effective corporate governance. The motto for success for any Board is therefore “Delegate, Don’t Abdicate” as the Board is definitely accountable to the proper running of the company.
Heinrich Mihe Gaomab II is the Executive Director of the African Development Bank Group. The views expressed are personal and not attributed to any organisation represented.
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