Sustainable Corporate Governance Practices for 2021 - Hackstaff & Snow, LLC

Sustainable Corporate Governance Practices for 2021

Blog post: Sustainable Corporate Governance Practices for 2021

Our attorneys at Hackstaff & Snow LLC know that Colorado corporate governance sets an organizations tone. It identifies the use of power and decisionmaking in the company. For decades, corporate governance has focused on its shareholders, regulation of its directors and executive team, accounting, tracking operational activities, and other duties.  

In 2010, the International Finance Corporation (IFC) described corporate governance as the framework and methods used to direct and control corporations pertaining to shareholders, directors, controls, transparency, and disclosure. Sustainability and social responsibility never seemed to fit the framework of corporate governance.  

Since then, the world has changed, and along with it, the corporate landscape in terms of the societal and environmental impacts of shareholder and director decisions. While the relationship between boards and shareholders is still at the forefront of governance, corporate sustainability has moved into the picture. 

Corporate Governance Documents: Policies and Practices 

Every business must have a set of governing legal documents. These documents establish the rules that govern how the company is managed and its owners’ rights and responsibilities. The corporate governance documents differ from one business to the next. Any document officially adopted by the organization as part of its operating framework is a corporate governance document. The policies and practices covered in corporate governance documents are as follows. 

Fiduciary Responsibility  

Corporate officers and directors have an obligation to use proper care and diligence when acting on behalf of the company. They are expected to exercise reasonable discretion in performing their duties to achieve the business’s best interests. In addition to corporate governance documents, state statutory law and judicial decisions can also impact the corporation’s fiduciary obligations. 

Capital Management 

Businesses need to meet their daily and short-term financial obligations with capital management. Every corporation needs a financial strategy that will ensure maximum efficiency of its cash flow.  

Regulation of Responsibilities 

All corporate governance documents need to  demonstrate each party’s responsibilities to the corporation and how they will be regulated. For example, the board of directors is responsible for enabling the company to grow sustainably and maximize corporate value over the medium to long-term based on company shareholders’ entrustment. 

Performance Tracking 

The documents should detail the use of performance metrics to measure performance tracking. There should be reliable process for receiving, reviewing, and utilizing the data they receive.  

Internal controls 

Effectual and consistent internal controls form the foundation for compliance with sensible and responsible business practices. Internal controls should be discussed in the governance documents to ensure compliance and risk management. They help the company achieve its goals, use resources carefully, and ensure that the information to make management decisions is reliable. 

The New Corporate Governance: Long-Term Goals and Impacts vs. Short-Term Results 

Today, modern large companies are taking steps to include long-term goals and impacts instead of traditional short-term results. Corporate governance isnt simply about the relationship between the board and the shareholders anymore. Its about more than just the here and now. Companies are starting to consider the long-term impacts on society and the environment. For these companies and many that will follow, corporate governance practices must include: 

  • Environmental sustainability policiesFinding companyspecific ways to minimize harm and positively influence the natural environment the pursuits of profits 
  • Advanced labor standards: Companies also need to minimize harm to people and society by going above and beyond laws and regulations. 
  • Board diversity: Board diversity and inclusion are more critical now than ever. Boards should find ways to recruit and include a diverse scope of members.  
  • Consumer and product safety elementsCompanies need to be held accountable for their products’ safety and the consumers who use them.   

Companies that do not start recognizing and incorporating sustainability practices into their corporate governance should be concerned about the reputational risk linked with social and environmental issues. Companies must find ways to integrate pollution, climate change, employee diversity, working conditions, corruption, and aggressive tax strategies into the corporate structure to maintain their value.  

Take Your Business to the Next Level with the Help of a Business Lawyer from Hackstaff & Snow LLC 

Corporate boards should be aware of recent and ongoing developments relating to economic, social, and environmental sustainability issues. Then they should identify which issues are most critical to the companys business and its shareholders and act accordingly. However, making the leap to corporate sustainability can be challenging. 

The good news is that by working with a seasoned business lawyer to incorporate sustainable corporate governance practices into your company, you can elevate your brand, enhance staff loyalty and generate the opportunity to boost your reach and public relations. 

If you are starting a business and need new governing documents incorporating sustainability practices, or if you would like your existing documents reviewed and updated to reflect sustainability, the experienced professionals at Hackstaff & Snow LLC are here for you.
Give us a call today to find out how we can help (303-534-4317).