Corporate governance and compliance are often overlooked as an administrative task necessary to form the corporation. However, maintaining appropriate internal controls, procedures, and policies are essential in protecting officers and directors from liability. A South Carolina business attorney can help you develop governance documents that ensure compliance with the expectations and requirements of shareholders, government enforcement agencies, and other third parties.
Five Essential Practices for Corporate Governance and Compliance
Corporate governance and compliance vary among different organizations. The definition of governance and compliance depends significantly on the specific organization and the type of industry within which the organization operates. In general, governance seeks to facilitate practical management of the company while increasing accountability. Compliance is the act of conforming to specific policies, regulations, laws, and strategies pertinent to the company’s operations.
Five essential practices can help managing shareholders, officers, directors, and managing members of a company protect the corporate veil and ensure transparency and compliance.
1. Mandatory Meetings
Directors, shareholders, members, and officers should conduct regular meetings. The company should maintain written records or “minutes” of those meetings. Without mandatory meetings, owners could be personally liable if a party is successful in piercing the corporate veil. Mandatory meetings are essential for maintaining the separation between the corporation and the people who manage and operate the company.
2. Defined Roles and Responsibilities
There needs to be accountability between the various positions that control the company. To ensure accountability, the company needs to clearly define the roles and responsibilities of the company’s board members, directors, and officers. The roles define who is leading the company and who is overseeing that leadership to ensure that all parties are acting in the company’s best interests. When roles are clearly defined, it helps establish procedures for holding each person accountable for their responsibilities and actions.
3. Set High Ethics and Integrity Standards
Officers and directors should be the moral compass for the company. They need to practice transparency and financial accountability in all areas. They should set high standards for ethics and integrity in every area of the business. When officers and directors demonstrate respect for compliance with federal and state laws, it establishes a company culture of compliance. Boards need to ensure that the company has policies and procedures in place for whistleblowing, handling conflicts of interest, and dealing with breaches in the company’s code of conduct.
4. Board Diversity
Companies should ensure that they have a diverse set of individuals serving on the board who have different skill sets, backgrounds, and expertise. The board members should be independent instead of being members of management. Being a member of management could interfere with their judgment as a board member.
5. Risk Assessments
Risk assessments are not limited to compliance or financial risks. Risk assessment should be a broad term that encompasses all risks that could impact the company from compliance and oversight to cyber-security and global warming. Effective risk management can improve risk-reward decisions and decision making.
Seek Help From a South Carolina Business Attorney
Corporate governance and compliance issues can be challenging and complicated, especially for small businesses. Contact us to speak with our South Carolina business attorneys today. Our South Carolina business attorney can help you draft and execute necessary corporate documents and develop policies and procedures that ensure corporate governance and compliance.