There are ten essential governance best practices recommended for banks and financial institutions in the US and other countries. These include:
1. Formalizing Duties and Functions
There is need to formalize and announce the appointment of voted directors on the board. Their duties and roles must be presented in writing to ensure compliance.
2. Reform the Structure of the Board
This will add more value to the effectiveness of the board. The size and level of commitment influences compliance with responsibilities. Moreover, the directors and the chairperson should be independent. This is important because it increases efficiency. Most importantly, the chairperson and CEO must not be the same individual. They must be separate offices, with defined duties. Ideally, the board should also have an established nomination committee.
3. Responsible and Ethical Management
Important best practices must be complied with to manage the organization. This requires agreement with Code of Conduct. There are other necessary practices needed in order to maintain customer confidence in the company. Though responsible and ethical management can be achieved through investigation and reporting. Reporting must be done in compliance with standard formats. Besides, directors, officers and employees must be informed about trading policies and securities involved.
4. Financial Reporting Protocols
There must be an established audit committee that provides data for reporting. CEO’s and Chairmen should be able to certify that the information is valid. The protocols required for generating these reports must involve reporting best practices.
5. Timely Disclosure of Information
Important matters and information regarding the company must be disclosed ONLY to people concerned. Timely disclosures are important because they ensure conformity with established policies.
6. Respect Rights
Stakeholders have rights that must be respected. They must be encouraged to take an active part in general meetings and other activities. Likewise, external auditors should also attend the meetings to answer questions related to audit reports.
7. Risk Management
There must be a strong system to oversee risk management. This involves identifying risks and implementing compliance with internal controls. Policies about risk management must be reviewed regularly. All these must be put into writing and disclosed to employees, officers and stakeholders.
8. Standards for Performance Evaluation
The organization must have standards for performance evaluation. This involves making established criteria that must be met by individual directors, key executives and the community as a whole.
9. Compensate Responsibly and Fairly
You must compensate employees and customers responsibly. This is one of the toughest practices in every organization. Managers must take account of the employee’s performance. In a standard firm, there must be remuneration policies.
10. Recognize Legitimate Stakeholders’ Interests
There are legal obligations and other requirements that must be fulfilled. Providing information about stakeholders’ interests in the report is recommended. These are important in establishing risks attached with decisions about the business.
Compliance with these essential governance best practices is the basis of a strong business enterprise.