Chapter 15

GOOD CORPORATE GOVERNANCE

Good corporate governance is essential to the success of a company; allows building trust of investors and other interested parties; reduces the risk of conflicts of interest; enhances the company's ability to attract and retain talent and is covered by codes of conduct, government regulations and industry standards. The governments of different countries play a crucial role in establishing and promoting policies and regulations to guarantee transparency, responsibility and ethics, through which companies are directed and controlled to seek efficient operation, for the benefit of all interested parties, including shareholders, employees, clients, suppliers and society in general, following basic principles, International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), which requires:

Ethics and shared values: good corporate governance and transparency are linked to ethics and values. Transparency involves disclosing information honestly and completely; Good corporate governance establishes ethical principles and standards for decision-making and organizational behavior.

Corporate responsibility: operate in a supportive manner, considering the impact of its decisions on society and sustainability.

Equity: fair and equitable treatment for all shareholders, regardless of their participation in the company, reduced conflicts of interest and protecting minority shareholders.

Transparency: providing clear information about its organizational structure, activities with complete and timely financial statements.

Accountability: the company's directors and governing bodies are responsible for their management to shareholders and other interested parties; Ensure that the organization's decisions are made responsibly, providing complete and understandable information..

Strategic orientation: focus on the formulation of long-term strategies, taking care of short-term goals. Good corporate governance and transparency are closely related and are fundamental concepts for the ethical and efficient functioning of an organization, whether it is a company, a public institution or a non-profit entity.

Risk mitigation: to identify and manage hazards by providing detailed information about the organization's operations. Good corporate governance, by establishing efficient risk management structures, complements this approach by ensuring that informed decisions are made and adequate controls are implemented.

Regulatory compliance: good corporate governance and transparency are linked to compliance with laws and regulations; Transparency involves disclosing information necessary to comply with regulatory requirements; good corporate governance establishes processes to ensure that the organization complies with applicable laws and regulations; both concepts work to establish and maintain strong and sustainable business practices.

Accounting principles play a crucial role in good corporate governance by providing a structured and uniform framework for the presentation of an organization's financial information; establish standards for the presentation of financial reports with complete and accurate disclosure for decision making, with ethical guidelines for the preparation of financial reports, assisting in risk management according to the financial position of the company; adequate valuation, complying with legal and regulatory standards.

Governments play an essential role in providing the legal and regulatory framework that supports good corporate governance, protecting the interests of different stakeholders and contributing to the sustainable and equitable development of the economy. They can enact laws and regulations that dictate how companies should operate, with the objective of protecting investors, employees and other stakeholders by addressing issues such as disclosure of financial information, liability of directors and management of conflicts of interest seeking to protect rights and interests of shareholders as they own the companies, including rules to ensure that shareholders have access to relevant information, participate in important decisions and have effective means to enforce their rights.

They may also establish regulatory bodies that supervise and enforce laws and regulations related to corporate governance, investigating business practices, imposing sanctions and ensuring compliance with regulations; use tax incentives to encourage responsible business practices such as offering tax benefits to companies that adopt specific good corporate governance measures.

Also, participate in the formulation of international corporate governance standards, collaborating with other nations to establish globally accepted standards and practices.

Good corporate governance benefits shareholders and companies; also to the general public, intervening to protect public interests and prevent business practices that may have negative consequences for society.

The members of a board of directors have both moral and legal responsibilities towards the organization to which they belong and towards the interested parties, such as shareholders, employees and clients, beginning with being authentic supports for the presidents and managers. Act with due diligence, complying with the organization's statutes; with loyalty and care in decision making, being informed, actively participating in discussions and decisions; without taking advantage of their position to obtain personal benefits at the expense of the organization. They must ensure that the organization complies with all applicable laws and regulations, starting with Good Corporate Governance, Corporate Social Responsibility, tax, labor and other relevant regulations. Commitments may vary depending on country-specific legislation and type of organizations; its statutes and internal regulations. They can also establish both moral and legal responsibilities towards the organization.

The boards of directors constitute a collegiate body to help the company be successful and generate value, supporting with their experience and knowledge; not co-managing. They are responsible for the long-term strategic vision of the company, in addition to having great legal responsibility.

To efficiently fulfill their mission, they must:

Establish the strategy, approve it and monitor it.

Verify that all members of the organization understand its values and behave in accordance with them.  Ensure ethics, transparency and order; indicate right and wrong.

  Require an adequate internal control system.

  Monitor risk management.

  Commit to professionalism and transparency in the preparation of financial statements and credible financial information.

  Appoint the company's main executives and establish succession processes.

  Manage crises and situations that overwhelm the administration and affect the fulfillment of objectives.

Its members must be people with judgment and independence who understand what the business is, its dynamics, the outlook and the threats. Be people oriented towards the search for results that generate value; with basic financial knowledge and capable of clearly communicating what they think, speaking clear language without any of the members taking it personally so that talent and experience bear the expected fruits for the benefit of the organization.

They should not have commitments with suppliers, competitors, shareholder groups or management so that they can express their opinions without fear of any kind. It is important that they belong to diverse disciplines and have business experience, knowledge of the company and the sector; The board member must not have or have had economic, family or other type of dependence on the management or controllers of the company. Also with a great ethical sense, demanding, rigorous and who enforce mandates.

They usually hold monthly meetings of four to five hours with material previously provided by the administration for their study, a task in which it is estimated that they must spend twelve prior hours. It is thought that 70% of the time should be spent on planning tasks and 30% on issues of the past.

They must have an attractive remuneration that generates commitment and reflects the significant role and legal responsibilities (civil, fiscal and criminal). Compensation equivalent to the hours required by the position (including preparation) is accepted for the hourly value of the president of the company.

It is recommended to avoid concentration of information in management because it can generate partial communication to the board, which would bias decisions due to the asymmetry that may arise. Likewise, the formation of specialized committees with the participation of a board member for specific topics.

 

Provides information in English to its investors.

Communicate your information in a timely, transparent and effective manner.

It has communication channels with its investors via telephone or website.

The resume of its main members can be consulted at any time.

Use the relevant information section of the Financial Superintendence.

It has independent members on its boards of directors.

Facilitates access to managers.

Adopts international accounting standards.

It has committees to protect the good governance of the company.

It enters the market, which forces it to open its books so that they can be consulted by investors.

It has a single type of actions.

Adopts high standards of good governance that translate into greater interest in action.

 

1. General Importance: It is essential to the success of a company and builds the confidence of investors and stakeholders.
2. Conflict Reduction: Helps reduce the risk of conflicts of interest and improves the ability to attract and retain talent.
3. Ethical Foundations: Based on ethical principles and shared values, connecting transparency with honesty and ethical decision making.
4. Corporate Responsibility: Includes operating in solidarity, considering the impact on society and sustainability.
5. Fairness and Transparency: Seeks fair treatment for shareholders, transparency in the organizational structure and provision of clear financial information.
6. Accountability: Managers are accountable to shareholders and stakeholders, making responsible decisions and providing complete information.
7. Strategic Orientation: It focuses on the formulation of long-term strategies, taking care of short-term goals.
8. Risk Mitigation: Identify and manage risks through efficient structures, facilitating informed decisions and appropriate controls.
9. Regulatory Compliance: Linked to compliance with laws and regulations, with disclosure of necessary information.
10. Role of Governments: They establish policies and regulations to guarantee transparency and ethics, contributing to the efficient functioning of companies.
11. Accounting Principles: Crucial to good corporate governance by providing a structured framework for the presentation of financial information.

1. Moral and Legal Responsibilities: They must act with diligence, loyalty, and care in making decisions, ensuring compliance with laws and regulations.
2. Strategic Role: Responsible for the long-term strategic vision, establishment of values, ethics and supervision of risk management.
3. Diverse Composition: They must have people with judgment and independence, results-oriented, ethical, and without commitments that could affect their impartiality.
4. Meetings and Compensation: They hold monthly meetings, investing time in planning, and must receive adequate compensation.
5. Communication and Access to Information: Avoid concentration of information in management and encourage open and clear communication channels.

1. Advanced Management: They adopt international accounting standards, have independent members on boards of directors and use committees to protect good governance.
2. Effective Communication: They provide information in English, communicate in a timely and transparent manner, and have effective communication channels with investors.
3. Entry into the Stock Market: They enter the stock market, adopt high standards of good governance and present a single type of shares.

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