corporate governance

What Is Corporate Governance?

Corporate governance is the system of rules and processes that directs how a company is led, controlled and held to account. It exists to protect long-term value, manage risk and ensure the board makes decisions in the interests of the company and its stakeholders.

Why corporate governance matters

• Reduces legal and operational risk
• Improves decision quality and performance
• Builds trust with investors, employees and society

Core principles of corporate governance

Corporate governance is based around these pillars:

• Accountability: Clear decision rights with owners for outcomes.
• Transparency: Timely, accurate reporting and open rationale for key decisions.
• Fairness: Equitable treatment of shareholders and stakeholders.
• Responsibility: Ethical conduct and compliance with law.
• Risk oversight: Defined risk appetite and effective controls.
• Sustainability: Focus on resilience and long-term value.

Who does what

• The board of directors sets the direction of the company, appoints and oversees the CEO, approves strategy and risk appetite and monitors performance.
• Committees (audit, remuneration, nominations, risk) deepen oversight where extra scrutiny is needed.
• Executive management runs the business day to day and reports on results and risks.
• Company secretary runs the board cycle, records decisions and ensures compliance.
• Internal audit tests controls and reports independently to the board or audit committee.
• Shareholders elect directors, vote on major matters and exercise information rights at the AGM and EGMs.

Governance models

• One-tier (unitary) board: Executives and non-executives sit on one board, combining strategy, oversight and challenge in a single forum.
• Two-tier board: A supervisory board oversees a separate management board, strengthening independence while leaving daily control with management.
• Ownership variants: Widely held, family-controlled, state-owned or foundation-owned, each with its own checks and balances.

How governance works in practice

• Define roles and decision rights with simple escalation routes so people know when to inform, consult or decide.
• Plan the annual calendar of meetings, filings and reviews, tying dates to reporting and strategic cycles.
• Run decision-led meetings with clear agendas, quality papers and realistic timeboxes.
• Record resolutions and actions with named owners and deadlines, then track to completion.
• Monitor performance and risk against targets and risk appetite using concise dashboards.
• Report and disclose financial and non-financial information in a consistent, timely way.
• Evaluate and improve the board, its committees and individual directors on a regular cadence.

Codes and reference frameworks

Most European companies anchor their approach to corporate governance in recognised frameworks, such as the OECD Principles of Corporate Governance. They are also impacted by EU-level rules such as SRD II and CSRD.

National regulators and codes provide further guidance, including the Autorité des marchés financiers (AMF) in France, the Financial Reporting Council (FRC) in the UK and BaFin in Germany. Here are some examples:

• France: Many listed issuers apply the AFEP–MEDEF Code on a comply-or-explain basis (issued by Association Française des Entreprises Privées (AFEP) and MEDEF), with strong disclosure expectations from the AMF.
• Germany: The German model often uses a two-tier structure and follows the German Corporate Governance Code, with co-determination rules in larger companies.
• Netherlands: The Dutch Corporate Governance Code emphasises long-term value creation, culture and stakeholder dialogue.
• United Kingdom: Premium listed companies typically apply the UK Corporate Governance Code on a comply-or-explain basis, reporting against its principles in their annual report. It puts strong emphasis on board leadership, independence, audit and risk oversight and remuneration discipline.

Reporting and disclosure

Companies publish financial statements, governance statements, committee reports, risk and control disclosures and, where in scope, sustainability information under CSRD.

Clarity, consistency and a clear link between narrative and numbers are essential for communicating in a manner that displays good corporate governance.

Board evaluation and refresh

Boards run annual internal reviews and commission periodic external evaluations to test composition, behaviours, decision quality and follow-through.

Developing a skills matrix to understand where your gaps are and putting in place robust succession plans for key roles keep the board fit for the future.