Governance Models: Structure, Policies & Roles

Instructor: Lee Davis

Lee has a BA in Political Science; and my MA is in Political Science with a concentration in International Relations.

Have you ever wanted to create your own company? Imagine you have invented a new piece of technology and you have just created your own company and are ready to go public with it on the stock market. You have so many new investors and staff that you can barely keep up. To deal with this you need to create corporate governance to make your start-up and great success.

For the purpose of this lesson we will be looking at the broad concepts of governance and what it entails. Governance refers to the policies, regulations and roles that an organization may create for the daily operations of that organization. Most organizations follow a standard structure, but this will vary based on the size and purpose of the organization.

Governance in the Private Sector

In terms of business, most companies have a Board of Directors that are in charge of the guidance and philosophy of the company. The shareholders, will usually hold yearly elections to choose the Board of Directors. Shareholders are people that invested money into the company and receive a dividend, or payout, on their investment. The company is usually ran by a President or CEO (Chief Executive Officer). The specifics of the relationship between the CEO and the Board of Directors is different for each company, but generally are the same.

The CEO is in charge of running the daily operations of the company, and knows everything that is going on in the company. You can think of the CEO of a company as being like the President of the United States, and the Board of Directors as the Congress. The Board of Directors make the policies and procedures for the company, and the CEO is in charge of carrying out the policies and procedures of the Board of Directors.

Governance and Policies

Policies, like the structure of a company, vary from company to company. For example, a bank will have many more policies and regulations than a small company that sells home goods. Policies can be broken down to both internal and external policies. While internal policies are made by the company, external policies are those that are made from outside organizations, mostly governments. In most cases, the internal policies of companies are made in response to the external policies that are made by governments.

For example, banks have many policies and regulations that are placed on them by the government, and therefore, they must make their own internal policies in order to comply with the government and to help them run efficiently.

The Roles in Governance

Roles in governance vary for each organization and for each person, or groups of people, in that company. In many companies the Board of Directors are the ones that play one of the most important roles. As stated before, it is their role to guide the direction of the company and to advise the CEO on where to take the company. The Board of Directors are usually elected by the shareholders of the company.

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