Corporate Governance, also known as good governance, is a form of governance in which the manager strives to ensure that the company, institution or organization operates as efficiently and responsibly as possible.
Within this form of government, accountability for the policy pursued and the decisions taken is central. The organization provides this accountability to employees, clients, stakeholders and society.
Corporate Governance: integrity and transparency are central
Integrity and transparency play an important role within this good governance, so that control and accountability are a natural process. Not only the outcomes and the choice for the use of policy instruments are transparent, but transparency is central to the entire chain.
Starting at agenda setting Until the policy is implemented, all choices and considerations are transparent to all stakeholders. This transparency makes it easy for stakeholders to influence the decision-making process and the financial position of the company.
Environmental groups and other action groups also have an important voice, because insight into considerations and choices increases the pressure to make the organization more environmentally friendly. It is then more difficult for the company not to comply public opinion and making decisions behind closed doors. With transparent management, action groups and stakeholders therefore have a major instrument at their disposal to exert pressure.
To ensure that all companies and listed companies adhere to transparent decision-making, a code of conduct has been developed. This code, derived from the Frijns code and Van Manen code, is also called the Code Tabaksblat named. This code consists of 100 'rules of conduct' that were also included in the law in 2004. The code of conduct is therefore not an optional code, but a code that every company and every listed company must adhere to.
What is the Tabaksblat Code?
This code of conduct, which was also incorporated into law in 2004, consists of more than 100 rules that include a number of matters:
- which task the directors of listed companies perform
- what the method is
- what the composition of the directors and supervisory directors is
- what remuneration these directors may receive
Within the code, a major position given to the shareholders, who can exert more influence on the decision-making of the processes and the implementation of the policy pursued.
It is also included that a supervisory director no more than five supervisory directorships may have in one term of office and that directors may be appointed to a period of four years. There are virtually no exceptions to this, which benefits the transparency and efficiency of decision-making.
The code also put an end to the enormous 'golden handshakes' as it is included in the code that this may not exceed one annual salary.
Companies and listed companies must submit an annual report write a report about the execution of the code.
Deviating from the code is allowed and possible in some cases, provided that there is a well-substantiated reason why the organization chooses that deviation. This limits the decision-making freedom of large companies and listed companies so that decisions and the use of policy measures are substantiated and transparent.
Criticism of the Tabaksblat Code
Although the code ensures more transparent decision-making and provides insight into board formation and supervisory directorships, there is also criticism of the code of conduct.
That's how it became for administrators easier to demand a higher reward. When the code was introduced, the intention was that this would occur less often. But the disclosure of names and salaries made it much easier for directors to demand the same salary as fellow directors.
Moreover, due to the introduction of the code, there were fears that stricter regulations would result than in our neighboring countries. The fear of it moving of top executives to other countries is a real fear that many companies struggle with.
Many companies also find the shareholder power too great as a result of which the code actually causes developments in the opposite direction and reduces transparency in decision-making.
Despite these criticisms, the code of conduct is a widely used instrument to monitor companies, directors and listed companies and to make them accountable for decisions made.
Especially in the field of reputation management the code plays an important role. In an annual survey by PWC, a large proportion of top executives indicated that issues such as corporate governance systems, carrying out risk management on a global scale and complying with increasingly strict regulations, have an important influence on the reputation of the company.
Corporate Governance and reputation management
Reputation management is important for every company and certainly for listed companies. Reputation management is therefore inextricably linked to good governance and good accountability for the decisions taken.
Reputation management has become even more important, especially due to the influence of environmental groups or other action groups. No company wants a bad name that means sponsorship opportunities are lost or all kinds of rumors emerge via social media about 'wrong' decisions. It is therefore important for every company to realize that good governance, in which transparency plays a major role, is linked to a good reputation.
The relationship between reputation management and corporate governance is therefore a relationship that should not be underestimated. Good management is very decisive for the position of shareholders and directors. Do you, as a company, not comply with the governance model and do you not do enough reputation management? Then as a company you miss opportunities and perhaps let good managers pass away.
In short, good governance is transparent governance in which decisions are made in a transparent manner. If an organization deviates from the statutory code of conduct, it is important to properly substantiate the 'why' question so that stakeholders, action groups and shareholders gain insight into the decisions taken and the considered decisions. By managing the organization well and transparently, you achieve a better reputation.
Also see: What is Corporate Social Responsibility?
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