3.6 Governance Pillar, TICCS®+

The governance of a company refers to corporate governance.

Corporate governance refers to systems of rules, practices, processes, and strategies by which a firm is managed and controlled. It involves defining relationships between a company’s management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. The object of corporate governance is to facilitate effective management and processes that lead to long-term success for the company.

The G20 and OECD Principles of Corporate Governance (OECD, 2015) outline the following principles to ensure effective corporate governance of firms:

The following are the classes of the super-class of principles of corporate governance:

G1 Ensuring the basis for an effective corporate governance framework: The corporate governance framework should promote transparent and fair markets and the efficient allocation of resources. It should be consistent with the rule of law and support effective supervision and enforcement.

G2 The rights and equitable treatment of shareholders and key ownership functions: The corporate governance framework should protect and facilitate the exercise of shareholders’ rights and ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.

G3 Institutional investors, stock markets, and other intermediaries: The corporate governance framework should provide sound incentives throughout the investment chain and provide for stock markets to function in a way that contributes to good corporate governance.

G4 The role of stakeholders in corporate governance: The corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active cooperation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

G5 Disclosure and transparency: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.

G6 The responsibilities of the board: The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.

_{OECD (2015). G20 and OECD principles of corporate governance. Organisation for Economic Co-operation and Development.}