Good corporate governance key to better business

Corporate governance refers to a system of rules, practices, and processes by which a company is directed and controlled. There are four pillars of corporate governance: accountability, transparency, fairness and responsibility. However due to different kinds of biases and self-centred concerns, sometimes we find a lack of corporate governance in corporate houses.

The necessity of strong corporate governance in Bangladesh is crucial for several reasons, and a lack of proper governance will ultimately disrupt the business houses.

A robust corporate governance framework enhances transparency, accountability, and fairness in business operations and creates investors' confidence. This builds trust and confidence among stakeholders, both domestic and international, leading to increased investment and economic growth for the country.

Poor corporate governance practices can lead to a decline in a company's stock value. With a lack of corporate governance measures in place, investors may become less likely to invest in a company, leading to reduced access to capital. Without capital, it can be difficult for companies to maintain operations, grow, and prosper.

We have to keep in mind that good corporate governance ensures that shareholders' rights are protected, and their interests are safeguarded. This includes fair treatment, access to information, and mechanisms for the exercise of their voting rights.

Business ventures are always a game associated with risk factors. Only businesses that are successful have the capacity to take calculative risks.

Sound corporate governance practices require the establishment of effective risk management systems and enable companies to identify, evaluate, and manage risks effectively, contributing to their long-term sustainability and resilience. On the other hand, weak corporate governance creates an environment where fraudulent activities and mismanagement can flourish.

Obviously, strong corporate governance ensures that boards are accountable to shareholders and act in their best interests. It promotes a culture of responsible impartial decision-making, oversight, and strategic planning, which are essential for the long-term success of a company.

A good strategic plan backed by strong corporate governance always leads an enterprise to long-term sustainability and a prosperous future. Corporate governance safeguards the interests of all stakeholders, including employees, customers, suppliers, and the wider community.

It ensures that their rights and concerns are considered in decision-making processes and that their participation is encouraged.

Eventually, a well-structured corporate governance framework helps companies comply with laws, regulations, and corporate governance codes. This minimises legal and reputational risks, and helps companies avoid penalties and sanctions. A lack of corporate governance measures can lead to reputational damage for a company. This damage can be long-lasting and have serious financial implications, including loss of revenue and legal costs.

In recent years, Bangladesh has recognised the importance of corporate governance and has made efforts to strengthen its corporate governance practices. The Companies Act 1994, the Bangladesh Securities and Exchange Commission, and the Institute of Chartered Secretaries of Bangladesh are some of the regulatory bodies that oversee corporate governance practices.

Overall, the adoption and widespread progression of strong corporate governance practices in Bangladesh is essential for the sustainable growth and development of businesses, attracting investment, and creating a favourable business environment.