The Best Way to Stay Away From Corporate Governance Debacles

The unchecked ambition of the founder, combined with a sycophant corporate culture that puts founders on a pedestal and a lack of accountability for leaders' misconduct/negligence, manifests into monumental failure. This leads to a corporate governance disaster with consequences for everyone involved – employees, vendors, customers, and investors. Yes Bank, WeWork, Satyam, Enron, Kingfisher, ILFS, Lehman Brothers, Volkswagen, Theranos, and Uber have fallen victim to such mismanagement. Each of these companies has been rocked by corporate governance scandals that have put them in a tailspin from which they’ve never recovered. To avoid such disasters and keep your company from disintegrating at its core, here are 10 ways you can ensure healthy corporate governance at your company: It all starts with sound corporate governance principles and values that you instill in your organization from the start – even before hiring your first employees.

Ethics Should Always Be Priority #1

Nothing is more important than protecting your company's values when it comes to ethics. This requires leaders with a strong sense of right and wrong and a willingness to do what's right even when their egos are at stake. Most importantly, companies need a culture where employees know that there will be consequences for unethical behaviour when things go wrong. In India, many small businesses fail not because they don't have talented leadership or competitive products—but because they never adopt an ethical foundation to grow. That shouldn't happen. Whether you own a little corner store or run one of India's largest conglomerates, don't assume it isn't necessary to develop these values; once you neglect them, you can expect to pay some sort of price. It might come in terms of customers turning away from your brand, friends abandoning you for being sleazy or even future generations ignoring your accomplishments if you lack integrity today. The bottom line? If you want your business to succeed, you have to make ethics priority #1.

Values Create Trust

Values are essential for a company's identity and culture. They add life and purpose and provide meaning to their employees' work, making them feel that they are part of something bigger than themselves. When values permeate everything a company does, it creates trust among employees, customers, investors, partners, and other stakeholders. This trust results in happier people who are more invested in both each other and what they do—and therefore, more productive and more profitable. Who doesn't want that? When creating your company's values, it is important to ask yourself three questions: 1) What should you do? 2) What shouldn't you do? 3) What should you not only refrain from doing but also explicitly promise not to do?

Best Practices Bring Predictability.

How do you avoid terrible corporate governance debacles, mismanagement, and misconduct? The key is well-articulated policies and a culture of accountability. Best practices bring predictability, build trust, and help keep companies running smoothly. Here are some best practices that can help keep you on track. Don't Make It Personal: When disagreements occur, it's tempting to take them personally. Don't! You may feel hurt but resist - don't take it personally. Learn from your mistakes or even see their point of view and move forward as team members committed to the success of your company.. Be Transparent: Transparency will help you win the trust and respect of all stakeholders, including investors, employees; partners; suppliers, etc. Nurture an Environment That Protects Stakeholders' Interests: Consider putting in place appropriate checks and balances like a whistleblower policy, an audit committee, or an ombudsman. This goes with transparency! Respect Other People's Time And Boundaries: Respect people's time and privacy, manage expectations consistently, and be open about timelines when you need something from others.

Nurture Inclusiveness

At a company level, the inclusiveness of every employee should be nurtured. This can only happen when leaders are self-aware and constantly working towards making their teams happy and productive. A leader's job is not just to achieve results but also to create a positive environment for all team members. When employees enjoy their work, they tend to produce better results because of their passion for what they do. Thus, leaders must ensure that they take care of each team member by going out of their way to include them at office events or informal get-togethers.

Moreover, managers have a responsibility to provide professional development opportunities for them. Regular feedback sessions with employees will help leaders understand how to improve interpersonal relations and leadership styles. While taking personal ownership is important, it doesn't mean leaders shirk their managerial responsibilities; instead, it means owning up to failures or mistakes to set things up again. Regular reviews are necessary for measuring progress and allowing time for improvement.

Instil Accountability

One of the many ways a company can suffer from a lack of accountability is if an unchecked founder heads it. Founders are typically driven and ambitious, but that same drive and ambition, in many cases, lead them to think they can do no wrong. As such, founders often play favourites with their employees—choosing to placate them with privileged access to information and other perks—and fail to instill accountability for performance. If one employee took any action that negatively impacts another, then all employees need to be held accountable, so there's fairness throughout your company. In addition, don't let yourself become complacent just because you have seniority at your company; ownership should never be based on tenure. Always act with integrity toward those you work with or above so as not to devolve into some sort of sycophant culture where misdeeds are ignored or even rewarded.

Adopt 'The Golden Rule'

Founder and former CEO of Koch Industries, Inc., Charles G. Koch, said in an interview: If you want to make good decisions, you have to be open-minded and listen to and learn from everybody. Simply put, he summed up 'The Golden Rule.' If someone has a different perspective or sees things differently from you, it's your job as a leader to hear them out and consider their input when making important decisions. It's easy for egos to get in the way, but remember: By shutting people down or refusing to entertain new ideas, you're acting like a tyrant—you'll miss out on opportunities that might otherwise benefit both your company and employees. When times are tough, there's no shortage of advice available; if anything, we see more theories emerge when there is less clarity about what will drive performance. The key thing isn't whether or not you should solicit feedback because, ultimately, there is one right answer and multiple wrong ones. The key thing is to ask yourself why? Why are you seeking feedback? Is it because senior leadership needs to stay ahead of market trends and competition? Is it because employees feel disconnected from your strategic plans? Or perhaps growth has plateaued, and everyone at headquarters must figure out how to hit reset so they can continue expanding into new markets.

Open Communication Is Key

Open communication is essential for corporate governance. Managers and executives need to feel comfortable bringing up issues or concerns, even if they seem minor or unrelated. Suppose a company doesn't have an open-door policy and a culture of accountability and transparency. In that case, it's much more likely that a founder will engage in wrongdoing without his or her subordinates reporting it, which can lead to disaster for companies on all levels. Sometimes leaders fall into traps like these because they don't have other checks and balances inside their organization. A lack of corporate governance sets up an environment where one person—the leader—can control everything inside their business with little concern for legal ramifications or ethical standards. Without shared power among stakeholders, founders may become accustomed to making decisions without consulting anyone else. They may also lose sight of what it means to make decisions on behalf of their organization—not just themselves or their small inner circles. The risk here is that when things go wrong, there are no others who can (or who want) to put safeguards into place and keep things from unravelling entirely.

Hire People Who Fit In

A company's culture is a reflection of its leadership. So, hire people who share your values and believe in your mission. You want employees who will be satisfied and happy with their job and feel that they are an important part of something big. It is imperative that these people trust you, respect you, and have faith in your ability to lead them down a path of success. That doesn't happen if there is office politics or ulterior motives on behalf of any given employee or friction between staff members. Managers should make it a point to understand how different candidates can blend into their current teams instead of imposing arbitrary demands for skill sets (i.e., prior experience) and personality traits (i.e., outgoing/hates interacting with others). Instead, focus on fit: what kind of person do we need at our company? Whom do we already have? Can these two personalities work together productively? And once a candidate joins, what are his or her chances of succeeding as part of your team? Those questions will help avoid needless turnover that wastes time and money. In addition to hiring based on personality, one must also have good relationships among all employees. This way, workers don't dread going to work because they find themselves surrounded by miserable souls day in and day out.

Reasonable Compensation Structures Is Crucial For Good Talent Retention

When setting up an employee compensation structure, founders must have realistic expectations and be cautious not to overestimate their company's abilities. Founders need to keep in mind that getting a larger piece of your company's equity pie does not mean you will have greater returns when it comes time for future fundraising rounds. It is important that you avoid overpaying executives—which can lead to a host of problems down the road—and disproportionately compensate early employees who may get extremely high salaries relative to later hires. Regardless of how valuable they are today, they might not be tomorrow, so treat all future hiring considerations equally. For example, if one executive wants more salary than another (even if they are just as talented), pay them both what each feels they deserve rather than upping their pay because he or she asked for it. Compensation needs to be predictable, fair, consistent across titles and roles, easy to communicate internally and externally, highly transparent within the organization and widely understood by outsiders. You want everyone to know how much CEOs earn in relation to VPs who earn in relation to managers and generalists who work on your team. The other important thing here is: Don't underpay yourself or others working closely with you for similar efforts by trying overly hard to compensate developers at market rates.

Treat All Equally Fairly At Every Level Of The Organization.

It is important to be fair, even when it doesn't appear that you should be. For example, if you are asked to stay at work late one evening, it is not ok for you as a CEO or other senior-level executive to say I can't because I have plans with my family or I am sick and need sleep. This sets a tone in your organization where some staff feel privileged and others do not. At every level of management within an organization, treat all equally fairly. If you ask your team members to stay late (which by itself isn't wrong), then you must also stay late yourself—or offer to let someone else leave early so they can spend time with their families. Once again, lead by example. Don't show favouritism towards anyone in your organization and always ensure everyone is treated with respect regardless of whether they are low on the totem pole or high up there!

Conclusions?

Corporate governance is a serious business, and its purpose is to protect the interests of employees, customers, and shareholders. Its absence in companies tends to turn them into anarchic regimes, or worse, fraudulent or incompetent companies that don’t serve anyone except its leaders. It’s in all our best interests that companies adhere to these principles.