Corporate governance refers to the legal obligation of businesses to practice corporate social responsibility. It includes business ethics, transparency, compliance to law, and risk management activities. It is very important for all businesses to practice corporate governance not only to fulfill legal requirement but also to establish a good reputation for the potential investors, suppliers, clients, and venture partners to see.

Corporate ethics

Corporate ethics would tell you that greed is not good. It is a must for companies to adopt ethical business practices in everyday operation. The company should provide a detailed code of ethics to serve as a guide not only for the employees but also for the superiors. Make use of the guide downloadable from the website of Institute of Business Ethics to create the code of ethics.

Legal Compliance

The law states that business operations should be carried out in a manner that will not harm the society in any way. Specific treaties with indigenous populations are created in relation to use of land. There are also certain workplace safety measures such as risk assessment procedures that need to be followed in accordance to the law. Measures to ensure that companies do not practice discrimination are also being overseen. Finally, there are also guidelines related to environmental impact that are imposed.

Sarbanes-Oxley Compliance

Companies in the United States are required to comply with the Sarbanes-Oxley Act 2002. It was enacted following the collapse of Enron due to poor corporate governance and audit practices. The act imposes companies to file annually a disclosure document with the Securities and Exchange Commission. It also requires financial statements to be certified by the Chief Executive Officer and Chief Financial Officer of the company.

Strong corporate governance within a company is contributory to its long-term success. If you own a company, this is one of the things that you should always remember.