Effective Governance Essay Example for Free

Effective Governance Essay Every successfully running organization that wishes to continue working with bright colors, intends to work in such an order that could help them not only to come up to the standards expected by their clients but also to meet their targeted objectives. This helps in survival and future success of the enterprise. To continue working like this, every organization would need effective governance that could help it in achieving its goals and objectives. Till now, there hasn’t been a proper definition of Effective Governance known yet, but it can be understood as the set of all the procedures, laws, processes, customs, policies, controls and systems that are used to safeguard the comp any and help to grow assets through which an organization can proceed in a successive manner. Effective governance is required for every company because it needs a strategic set of systems, controls, laws and regulations for its external capital, financial transactions, investment, growth and also to prevent relationships with stakeholders and others. In short, governance is a set of procedures, controls and systems through which a company prospers while securing accountability. On the whole, governance is entirely an internal system which helps the company in carrying out effective operations in collaboration with the external resources. External resources include the external capital and shareholders. External capital is the loan or equity used for the financing of the company to carry out their business activities, investment and growth. Shareholders and stakeholders are the external resources who make investment in the company’s business to make profit. The outcome of making investment in the business by the stakeholder/shareholder goes to the economic development of the country. It not only strengthens the confidence of the organization and investors, but also gives a boost to the social economy and helps in building up a strong relationship between both. Economic power of any nation can be measured from the annual investments made by the investors, shareholders, stakeholders in different organizations. The more sound and subtle investment made, the more a country would prosper and become stronger internally. Principles of Effective Governance: †¢ Leadership †¢ Empowerment and accountability given to stakeholders †¢ Good communication †¢ Fair service †¢ Perform to accomplish †¢ Measure †¢ Learn to grow †¢ Participation of the board †¢ Shareholders’ awareness According to an adverb, it is said that â€Å"Action speaks louder than the words†. So is with the companies with governance. A company having proper and effective governance has the ability to work more efficiently and in productive manner than any other company that does not have any sort of set of rules or governance to act upon. This governance applies on every single entity in the company. Let it be the entrepreneur, employees, management, shareholders, and other related bodies to the organization. All the people relating to the company would be satisfied that the organization would run in an ethical manner because it has a set of systems and controls that drives it to run smoothly and in a specific manner, that not only would help it to run productively but also has a certain future adjacent to it. It also helps in letting know about the responsibilities of every person related to the company that what should be their role to act upon in order to bring the maximum outcome from the business and thus, creates reputation of the company. In short, effective governance acts as a tool to run the business efficiently and produce remarkable results and profit. Good relationship with the stakeholder matters a lot for the business as well, that is why managing a good communication level with the shareholders is also very necessary and is a part of governance since governance depends on the establishment of manageable communication between both. Stakeholders can be individuals or institute who are part of the company externally. They are involved through the investment they have made in the business to promote the company and generate revenue. The involvement depends on the amount of financial investment they have made in the company. The relationship can be direct or indirect. Previously, effective governance was taken as a source to capitalize on the profits and revenue an organization can generate as much as possible. But, with the passage of time, governance processed and involved the aspects of responsibility, accountability and prevention of stakeholders, shareholders interest. Effective governance not only develops the company’ reputation but also safeguards and helps in protecting the risk of downfall of company’s reputation and status. An important factor that every organization would need is â€Å"Board of Directors†. This talented and diversified team is responsible for managing the whole infrastructure of the company and looks after the internal and external affairs including the relationship of stakeholders and carries out the maximum accountability. This is because the board of Directors is legally fully responsible for every matter that is handled and they can delegate the matter accordingly. If not practiced properly, the entire economic system of the country could go on stake because most of the public oriented companies deal on public shares, and without derived governance, the whole situation can be vulnerable. Any country’s economic platform cannot continue without effective governance, because it cannot rely on the government policies (that keep on changing due to the political conditions), nor any regulatory agency which in intact with the government policies and works for companies with stakeholders. Another factor that affects the governance of a company is decision making by the senior management. Decision making by the management ensures that the work carried out is a major responsibility that is made by following the company’s policies and procedures. It must ensure compliance with legal, regulatory and social requirements in their area of responsibility.