The choice of a good corporate governance guide depends on the company’s objectives. Corporate governance might need to be improved because of tighter regulation in a particular industry or criticism from the auditors. The company might be moving into a significant new market in which regulations are tighter. A recent crisis might have caused governments or regulatory bodies to scrutinize corporate governance practices more closely and to demand higher standards of governance from business. A corporate governance guide should therefore be chosen on the basis of the industry, country or region covered and the quality of the material.
A company doing business in the United States for the first time would be well advised to acquire a corporate governance guide covering regulatory matters. This will enable the company to set up procedures to ensure compliance with the rules. Companies setting up operations in other countries can obtain guides to corporate governance in smaller jurisdictions through organizations such as the International Chamber of Commerce.
Companies operating in particular industries might need to find a more specialized corporate governance guide. Banks, for example, have been faced with various corporate governance challenges as a result of failures and scandals. A general corporate governance guide would not cover the very specialized issues that are relevant to banks and to the level of risk in the financial industry. The corporate governance system must take into account the regulations and standards that apply to the particular industry.
Corporate governance is a concern not only because of increased regulation in various countries or industries. The directors of a company have the responsibility to the shareholders to ensure that the business is as efficient and profitable as possible, and an effective corporate governance framework is a part of this. The directors need to know that internal procedures are tight and will not allow any difficulties to arise from negligence or carelessness. Directors must be satisfied that any problems arising will be picked up and dealt with by the internal controls and procedures that they have put in place.
The quality of the corporate governance guide must also be taken into account when a selection is made. A guide that covers the correct country or region might not necessarily have the scope or depth that is needed by the company. The corporate governance guide must therefore be chosen by someone in the company who already has some knowledge of the issues that should be covered by a good corporate governance guide. Taking into account the industry, countries covered, scope and quality of the material, the correct decision can be made.