Corporate governance is not limited to commercial companies but applies also in general terms to Trusts and Charities, Mutuals and publically funded organisations such as the NHS, Police and Fire Service Authorities, Museums and Art Galleries etc. Wherever there is a Board of Governors, Trustees or Directors then the general principles of corporate governance apply.
The term “corporate governance” refers to the structures and processes by which companies or organisations are controlled. In the past Boards have tended to be populated by “well-intentioned amateurs” with no real business acumen or training and with new members acquired through the “old boy network”. The development of Company Law and corporate liability and the examination of recent catastrophic corporate failures (such as Enron, Equitable Life and Northern Rock) have resulted in a demand for higher standards of corporate governance and particularly the increasing personal liability and responsibilities of the Chairman and non-executive directors who now have the role of “policing” and supervising the executive directors who in turn manage the day-to-day activities of the company or organisation.
These are now incorporated in the new guidelines contained in the UK Corporate Governance Code, (formerly the Combined Code), which took effect from 29th June 2010. This Code has been further supported by the Financial Reporting Council’s Guidance on Board Effectiveness issued in March 2011, which assists Board members (and particularly the Non Executive Directors) to understand what is required of them especially in the context of understanding the nature and risks of the business (risk management) and becoming effective contributors to the Board. (See Useful Links).
Best practice by its very nature is constantly changing and therefore it is necessary for the Board to be alive to the new corporate governance principles and to apply them proportionately and where appropriate. Fiona Gregory Consulting can guide businesses as to up to date best practice to ensure full effectiveness of the Board as a whole and its individual members.