Corporate governance is a term that refers to the set of rules, values and procedures by which a company is operated, directed and controlled. Good corporate governance provides a structure that enables a corporation to attain its objectives and efficiently use its resources. It serves to balance the varying interests of the company’s stakeholders – including shareholders, managers, customers, government, and the community at large. Effective corporate governance also serves as a mechanism for monitoring a corporation’s actions and ensures compliance with all state and federal law. Further, it promotes accountability and transparency in a corporation’s internal and external relations and encourages ethical conduct at all times.
In recent years, there has been a renewed interest in corporate governance practices of both large and small corporations as a result of the high-profile scandals of major corporations, such as Enron and WorldCom. In an effort to restore the public’s trust in U.S. companies and markets, significant legislation (e.g. the Sarbanes-Oxley Act) has been enacted at both the state and federal level. The new realities of corporate governance demonstrate that no corporation is immune from criminal or civil liability and no institution is too large to avoid accountability for the unethical or illegal actions of its employees. In light of this new reality, corporations need to examine and adopt legal compliance mechanisms and amend their internal policies in order to limit any potential liability.
If your institution has questions or concerns about this topic and you would like further information, please email James G. Ryan at jryan@cullenanddykman.com or call him at 516-357-3750. This article was written with Hayley Dryer, an associate at the firm.