Governance - Corporate & Institutional

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Governance

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Corporate Governance News




what is corporate governance?
what is institutional governance?

Corporate governance provide plenary (overall and ultimate) leadership for a corporation - a body corporate. Institutional governance provides plenary leadership for organizations such as not-for-profit societies. The principle functions of corporate and institutional governance are the making of by-laws and related governance policy, providing direction, directing, exercising ultimate control over and having ultimate responsibility for an organization. This direction and control are provided either by the owners - shareholders in the case of corporations and members in the case of societies - of the organization or by their representatives. The individuals who are part of an organization's governance are usually called directors. Together, they form a board of directors.

The principles of governance that apply to a publicly or privately owned for-profit corporation and those that apply to not-for-profit societies are the same. The differences are in the application of the principles and the laws under which these bodies are required to conduct their business.

The principles of corporate governance closely parallel the principles of political governance. The former represents, provides direction and directs on behalf of the body corporate, while the latter acts on behalf of a body politic.


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Heritage Institute's Services

The Heritage Institute's services include:

  • Advisory & consultation services
  • Facilitation
  • Training

for:

  • Board of Directors:
    • Corporate governance policy
    • Constitution & by-laws
    • Corporate governance manuals
    • Roles & responsibilities
    • Division of responsibilities
    • Meeting management
  • Board-management-employee relations
  • Committee & meeting management
  • Strategic & business planning

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difference between governance & management

While governance is the exercise of plenary leadership, management is the exercise of business and operational leadership. Governance provides direction, management manages and conducts the business mandated by the direction.

Where an organization has a board of directors, the directors represent, act on behalf of, and are accountable to the owners or members of the organization. Managers are accountable to the directors - usually through the senior-most manager or chief executive officer. Consequently, there is a potential conflict of interest when directors are appointed or recommended by management - unless the managers are also the principle owners.

According to several governance models, directors are not delegated individual authority. Rather, they exercise their functions and formulate their decisions collectively as a group. Managers on the other hand usually have delegated decision-making authority and individual responsibility. Some decision-making authority may, however, be assigned to a management team.

Does this mean that directors cannot have managerial functions or that managers cannot have roles as directors? If the laws of the land permit, and if the bylaws or governance model of the organization allow - a director can be a manager or the other way around. This may be especially common in smaller or family owned organizations. However, the role and functions of directors and managers still remain distinct. A person simply wears two hats while other directors and managers in the organization may maintain separate roles. A potential conflict-of-interest or disproportionate power could, nevertheless, be present in public organizations, when one person assumes both roles.

While some credit these functional divisions of responsibility, accountability, power and authority to the British parliamentary system and the signing of the Magna Carta, others will tell you that the origins of these differences in function and power go back to ancient times - when two human beings got on to a log to cross a river. Without an understanding on who would do what, they could not coordinate their efforts and paddle to their destination. Eventually, they put their heads together and mutually decided that the one in the back would steer while the one in the front paddled. This division of function and responsibility was of mutual benefit and helped them get to their destination - their goal - efficiently and expeditiously.

Like those ancient paddlers, while directors often work in the background, executives are out front and are the visible face of an organization to the outside world. Corporate governance is poorly understood by the public at large, while business management is a recognized academic discipline.


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