Unlocking the Secrets of Effective Corporate Governance: Insights from LLM Graduates

Corporate governance is the distinguishing factor between long-term business victory and losses. It is essentially the business intelligence that delegates an organisation’s resources and energy to different processes within the body while following its set rules and regulations. It is essentially the governing organ of the business body.

Corporate governance can be likened to an example of a team in a boat race. The team with the best unity, teamwork, leadership, attitude, and consistent effort is the one who wins. In this case, what governed the team was the set of rules and regulations the winning team followed to streamline its efforts.

Similarly, every corporate body follows regulations that govern its practices towards the best business interests.

This article will explore insights from reputed professionals and renowned surveys on key factors in corporate governance, such as the board of directors’ responsibilities, corporate governance structures, transparency, and disclosure, as well as offer invaluable insights on corporate governance.

Introduction to Corporate Governance

What is Corporate Governance? 

Corporate bodies follow a set of rules and regulations when executing business operations. These rules are collectively known as corporate governance. The four Ps of corporate governance are people, purpose, performance, and process.

• Importance of effective corporate governance

Corporate governance plays a pivotal role in the success and sustainability of organisations. It comprises the systems, processes, and structures that guide and control a business' operations. Good corporate governance can ensure accountability, transparency, and ethical conduct in a business body.

Moreover, effective corporate governance is crucial for maintaining stakeholder trust and maximising long-term value generation. 

Unlocking the secrets of effective corporate governance

Here are some key insights from LLM graduates, corporation heads and professionals, on effective corporate governance and its effects on business and life. 

1. What is the importance of corporate governance?

Corporate governance is of paramount importance for both shareholders and stakeholders. 

 According to a survey conducted by EY, effective corporate governance practices are strongly linked to long-term value creation and are critical for building trust, while maintaining credibility with investors and the wider public (EY, n.d.). 

The importance of corporate governance is undeniable. Transparent and accountable governance practices have the potential to increase the attractiveness of an organisation to potential investors. 

EY EMEIA Area Managing Partner and EY Global Leader, Julie Linn Teigland, disclosed in the survey that companies executing sustainable strategies in their operating model, products, support function, or talent manage to create more financial value for the company and its shareholders while creating value for the planet and society as well, through an approach called value-led sustainability.

2. Responsibilities of the board of directors

The board of directors plays a vital role in the establishment of corporate governance structures. Their primary responsibility is to provide strategic direction, oversee executive management, and protect the interests of shareholders. 

A robust board ensures the implementation of effective corporate governance practices including risk management, compliance, and ethical decision-making (PwC, n.d.). 

By efficiently carrying out their fiduciary duties and actively engaging in the improvement of governance structures, boards contribute to the long-term success and sustainability of the organisation.

3. Corporate governance structures and models

Every corporate body has its own set of corporate governance rules which differ from other business bodies. Not just that, corporate governance for departments of a single business body may have differences too.

All in all, various corporate governance structures and models exist globally. They differ based on their legal frameworks, cultural contexts, and regulatory environments. The most common corporate governance models include the unitary model, the Japanese model, and the two-tier model.

Corporate governance challenges can rise when each structure has its own set of merits and challenges. The board of directors faces challenges and takes action to mitigate the risks in adapting to changing governance requirements and tailoring the structure to the circumstances.

This means corporations must adopt a structure that aligns with their unique needs and objectives (The University of Law, n.d.). 

4. Transparency and disclosure in corporate governance 

Transparency and disclosure are fundamental pillars of effective corporate governance. Organisations must provide accurate, timely, and comprehensive information to shareholders and stakeholders. 

Transparency ensures that decision-making processes are accountable and that conflict of interest is managed.

Disclosure practices, however, may vary across jurisdictions due to privacy restrictions on information. Nevertheless, adherence to relevant regulations and best business practices is essential to maintain the confidence of the stakeholders and investors in an organisation (Harvard Business Review (HBR), 2019).

5. Risk management and corporate governance

Risk management is an integral part of corporate governance. Boards are responsible for identifying, assessing, and mitigating risks that could impact the business body.

 Effective risk management practices involve establishing risk appetite, implementing efficient control mechanisms, and regularly monitoring and evaluating risks (HBR, 2019). By incorporating risk management into the governance framework, organisations can enhance their resilience to changing market scenarios.

6. Corporate governance challenges and emerging trends

Emerging market trends always bring new challenges to existing corporate governance structures. Corporate governance must be continually evolving to address emerging trends. 

Some of the common corporate governance challenges include balancing the interests of diverse stakeholders, addressing conflicts of interest, board independence, and effectively managing corporate culture (Harvard Business Review (HBR), 2019). 

Emerging trends, such as environmental, social, and governance considerations, increased shareholder activism, and the digital transformation of business operations, pose new governance challenges in the present day.

7. Case studies of effective corporate governance

Examining case studies of organisations with exemplary corporate governance practices provides invaluable insights. By analysing successful governance models and strategies, organisations can learn from real-world experiences and apply best practices to their governance frameworks. 

Case studies highlight the importance of board effectiveness, stakeholder engagement, risk oversight, and ethical decision-making in achieving sustainable business outcomes. An example of good corporate governance would be PepsiCo.

8. Insights and experiences from LLM graduates in corporate governance

LLM graduates specialising in corporate governance bring unique perspectives and expertise to the field. Referring to renowned surveys or reading professional discussions from LLM graduates in the field of corporate governance can give you a clear understanding of how it works in the world.

Application of effective corporate governance in implementing CSR initiatives

Corporate social responsibility (CSR), also known as corporate citizenship, is a business concept where companies invest their time and resources in initiatives other than their core business practices like environmental awareness and human rights initiatives. A study by Deloitte in 2019 found that 63% of millennials and 56% of Gen Z employees believed that businesses should have a positive societal impact.

Given the rise of environmental awareness and customer intelligence in the digital age, corporate social responsibility is vital to maintain a positive business image that could encourage business and trade for the company.

How do companies carry out their CSR practices?

Corporations generally carry out these initiatives under their CSR schemes and policies which are then incorporated into the company’s corporate governance structure.

CSR is a pivotal part of business operations today for corporations and effective corporate governance is paramount for the successful implementation of CSR initiatives.

According to the EY (Ernst and Young) Sustainable Value Survey, 69% of companies said they captured higher financial value than expected from their climate initiatives.

Corporate governance in law and work

Effective corporate governance is an indispensable element of successful organisations. It safeguards stakeholder interests, enhances transparency, and promotes long-term value creation. Through continuous improvement and flexible governance structures, organisations can unlock the secrets to effective governance. 

To thrive in this field, consider the Master of Laws (LLM) in Corporate Governance from the London School of Business and Finance, Singapore (LSBF SG). This programme is a postgraduate degree designed for law and non-law graduates by the University of Law, UK and holds a 5-star rating from the QS World University Rankings.

This internationally recognised degree focuses on developing an in-depth knowledge of corporate governance in practice and can open pathways to careers in law, politics, compliance, international relations, management and much more.

LSBF SG is among one of the top 50 business schools in Singapore and is internationally renowned as a standard for business and finance education.

Consider enrolling in the programme today!

This article was written by Rebecca Paulraj and edited by Candice McDowell.