GOVERNANCE

Governance refers to the corporate governance performance, ranging from factors of decision making and internal controls - accurate and transparent accounting methods, assuring the absence of conflict of interests and illegal practices, managing long term risks - to the purpose of the corporation and executive pay and embracing diversity on the board of directors. Basically, how the company is managed - the system of rules, processes and practices - by the top executives. How the board of directors and the management are aligned with the interests of the company’s stakeholders. To sum up, the overall effectiveness of the corporation.

Compared to the previous factors, the “G” is still less known. But the role of governance has the same importance as the other factors. An appropriate and transparent corporate governance helps to build an environment of trust, necessary to attract long-term investments, guarantee financial stability and support sustainable growth.

In a globalized world, the importance of corporate governance is growing, even for sustainable development. According to the Brundtland report, it is “the development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Policies around employment practices, data protection and board of directors structure played an important role in terms of ESG rating upgrade. Points for corporate behaviour dove scores higher for many companies.

The UN Global Compact definition gives us a full snapshot: at the micro-level, companies can enhance good governance by integrating corporate sustainability principles into their operations and relationships, allowing for greater transparency, accountability and inclusiveness. At the macro level, companies can contribute to the development and implementation of international norms and standards, for instance, as part of their commitment to the UN Global Compact. Every company should support the promotion of transparent corporate governance and inclusive policies, and the creation of a positive impact on the whole society.