Corporate governance: why good governance is the key to successful compliance

Introduction

Corporate governance refers to the way in which a company is managed and controlled. It encompasses decision-making structures, internal policies, corporate culture and the division of responsibilities between executives, board members and managers. We often think of profits and strategy, but we sometimes forget that governance plays a crucial role in regulatory compliance. Indeed, good governance creates an environment conducive to compliance with laws and standards, while poor governance can lead to breaches and scandals. Why does sound governance promote successful compliance? Here are some answers.

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Governance and compliance: two inseparable concepts

A company can have every compliance procedure imaginable, but if governance is not in place, these efforts are likely to be in vain. The link between governance and compliance can be seen on several levels:

– Exemplarity and “tone at the top

Compliance begins with the example set by management. If managers demonstrate a strong commitment to compliance and ethical behavior, this culture spreads throughout the organization. What we call the “tone at the top” influences employee behavior: they will be more inclined to follow the rules if leadership sets an example on a daily basis. Exemplary governance prioritizes ethics as much as performance, which is the basis of successful compliance.

– Clear policies and code of conduct

A board of directors committed to governance will ensure that the company has solid internal policies (code of conduct, ethical charters, anti-fraud policies, etc.). These documents provide a framework for expected behavior and serve as a reference in case of doubt. Good governance means updating them regularly and ensuring their effective application. Clear policies simplify the task of compliance: everyone knows the rules of the game and the processes to be followed.

– Organization of responsibilities and controls

Governance determines who does what within the company. In terms of compliance, this means appointing those in charge (e.g. a compliance officer, a DPO for data protection, an ethics committee) and giving them the means to act. A well thought-out governance structure avoids “grey areas” where no one is in charge. On the contrary, every risk of non-compliance is placed under supervision. Governance also includes internal control bodies (internal auditors, audit committee) to monitor compliance with procedures and the effectiveness of compliance systems. These internal checks and balances enable any shortcomings to be quickly detected and corrected.

– Transparency and communication

Good corporate governance is about transparency, both internally and with external stakeholders (shareholders, regulators). Transparent communication on compliance issues, potential incidents and actions taken builds trust and commitment. For example, if a compliance problem arises, responsible governance means informing the Board of Directors and, if necessary, the authorities, rather than trying to conceal it. This transparency discourages unethical behavior and encourages rapid, collective problem-solving.

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The benefits of good governance for compliance

In practice, what concrete benefits can we expect from exemplary governance in terms of compliance?

• Reduced risk of non-compliance: policies are respected, internal controls catch anomalies, employees dare to report problems without fear.
• More effective incident response: with clear chains of command, the company can manage a compliance crisis (e.g. regulatory investigation, discovery of internal fraud) quickly and in a coordinated way.
• Enhanced reputation with regulators and the public: an organization perceived as serious and well-governed will be more easily trusted by the authorities, and may even benefit from a certain benevolence in the event of an isolated deviation.
• Lasting value: governance and compliance contribute to a company’s longevity by avoiding scandals and building a solid corporate culture.

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Conclusion

Good corporate governance and successful compliance go hand in hand. The framework put in place by governance (values, structure, controls, transparency) is the soil in which a compliance program can flourish. For large companies in particular, where the risk of dispersion is high, governance acts as a common thread that aligns everyone with the goal of complying with laws and standards. By investing in exemplary governance practices, the company gives itself the means to navigate serenely through a complex regulatory universe.