Corporate governance is a set of rules and best practices that guide the direction and control of a business, involving various stakeholders.
It includes aspects of social and environmental responsibility, aiming at transparency, accountability, fairness and integrity.
This system aims at fair and responsible management for the common good.
Corporate governance is crucial to ensure the sustainability and credibility of the company, avoid abuse of power, improve performance and comply with legal obligations, especially in France with the Commercial Code and the various governance codes for companies listed on the stock exchange.
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1. What is corporate governance?
Corporate governance is essentially a set of compliance rules and best practices that indicate how a business should be run and controlled. Governance, as a mode of organization, makes it possible to involve and protect the various parties impacted by company decisions against possible risks and uncertainties related to events that a company may encounter during its life through these various aspects:
- Shareholders
- The Leaders
- The employees
- The customers
- And more broadly, society. Indeed, businesses have an impact on society and the environment, and governance can include social and environmental responsibility considerations, more commonly known by the acronym R.S.E. To learn more, you can read our article on” Corporate Social Responsibility (CSR) ”.
This management system is intended to be virtuous and democratic, so it is based on a certain number of principles, including:
- La Transparency : businesses must provide clear and accessible information on their financial performance, governance and business practices;
- La Responsibility : officers and directors are held accountable to stakeholders for their decisions and actions;
- TEAFairness : the interests of all stakeholders are taken into account in an equitable manner;
- Integrity : businesses must act ethically and respect laws and standards (especially environmental ones).
Finally, corporate governance is simply a way of ensuring that businesses are managed fairly and responsibly for the benefit of all.
Learn how proactive legal risk management can protect your business and drive growth in our article on” Managing legal risks in business ”.
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2. What are the objectives pursued by the establishment of corporate governance?
The establishment of a governance system is not in itself a legal obligation; however, considering its establishment is appropriate for several reasons. Indeed, corporate governance is essential for the long-term viability and credibility of the company with third parties.
It makes it possible to avoid abuse of power by ensuring transparent management. In fact, in this type of organization, all interests are considered, which prevents company managers from making decisions based on their interests alone at the expenses of investors or employees. This is made possible in particular by the establishment of mechanisms for the distribution of powers and the transparent communication of important information on the financial and operational activities of the company.
Finally, it allowsImprove the performance of the company. Businesses with solid governance are better managed and develop a transparent and responsible corporate culture, which, in turn, can boost long-term performance and therefore strengthen competitiveness.
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3. Legislative framework and legal obligations
In France, corporate governance is governed by a set of regulations and standards aimed at ensuring transparency, accountability and fairness. The main legislative framework consists of the provisions of the Commercial code.
Companies listed on the stock exchange must join Governance codes specific. The Code AFEP-MEDEF is widely used by large CAC 40 companies. It focuses on transparency, executive compensation, and the implementation of best governance practices. The Middlenext code Is aimed at SMEs and businesses, its recommendations being adapted to their needs.
These governance codes are not made mandatory by law but companies that decide not to follow them must explain their motivations. This practice is intended to be consistent with Principle of “comply or explain”, which aims to encourage the adoption of best practices while leaving businesses with some flexibility.
Governance rules in France also include international standards such as the ISO 26000 standard Which integrates the Responsability social of companies (CSR) in governance. This standard encourages businesses to adopt sustainable and ethical practices, thereby strengthening their credibility and long-term performance.
In addition, businesses must comply with European directives which often influences national legislation.
The article L.225-37 of the Commercial Code, for example, regulates the obligations to publish management reports. It therefore reinforces transparency and accountability within companies.
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4. How does corporate governance materialize?
The governance system is based on the establishment of a strategy based on existing regulations and the values specific to each company. Different bodies may be involved in governance depending on the type of business.
It may be provided by the bodies provided for by the legislation:
- The Board of Directors or the Supervisory Board: Made up of a group of people, some of whom may be company managers, who are responsible for overseeing the management of the business. The Board makes important decisions and ensures that the company follows the rules;
- General Shareholders' Meetings : shareholders meet at a general meeting to vote on key issues, such as the election of members of the board of directors, the management of the company or the approval of financial accounts. Dig Deeper into the Subject with Our Article to Find Out How to effectively manage your shareholder relationship.
However, more frequently (especially in large companies), by special committees:
- The CODIR : Tea Management Committee takes the strategic decisions of the company;
- The COMEX : the Executive Committee, which provides general insight into strategic decision-making;
- The COMOP : the Operational Committee, whose role is the implementation of the objectives defined by the Management Committee.
Ultimately, the concept of corporate governance is an essential framework for the management and supervision of businesses, aimed at ensuring transparency, accountability, fairness and integrity in decision-making.
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5. Corporate governance: who are the actors involved?
In France, corporate governance involves various actors, the Board of Directors Being at the heart of this structure. Composed of Corporate Officers, its main role is to define the overall strategy of the company and to oversee its implementation. The board of directors is often supported by specialized committees, such as Audit Committees, of Remuneration And of nomination, which focuses on specific aspects of governance.
The Managing director (DG) or the President and CEO (CEOs) occupy a prominent place in the daily management of the company. In collaboration with the Board of Directors, the CEO implements strategic decisions and ensures the smooth running of operations. He is responsible for decision making and implementing effective internal policies.
Les Shareholders or Partners Are also key players, especially in companies listed on the stock exchange. They Exercise Their Power During General Meetings, where they vote on important decisions such as the Appointment of Directors And Approval of the Annual Accounts. La Executive compensation Is a subject often debated at these meetings, in accordance with the rules of governance. Shareholders Can Exercise Their Right to Vote and Receive Dividends.
Les Governance committees Are tasked with examining and recommending appropriate governance practices. They ensure that best governance practices are followed, which includes transparency, fairness, and integrity in managing the business.
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6. What about innovation in terms of corporate governance?
Corporate governance in France is constantly evolving to meet modern challenges and the growing expectations of stakeholders, who are numerous and diverse. One of the main innovations is the increased integration of Digital technologies.
Blockchain, for example, offers solutions for increased transparency in decision-making and shareholder vote management. Likewise, theArtificial intelligence (AI) is used to analyze complex data and provide informed recommendations to boards of directors. For the Bookkeeping, for example, it represents a revolution in the way data is designed.
The Sustainable Development has also become a central pillar of modern governance. Companies implement long-term strategies that must take into account the financial performance and the environmental and social impact of their activities. This approach is often supported by ESG indexes (environmental, social and governance), which assess the performance of companies according to these criteria.
The new governance rules also encourage greater diversity on boards of directors. La Gender diversity and expertise Is seen as a way to enrich perspectives and improve decision-making. Legislative initiatives such as the Copé-Zimmermann law For example, impose quotas for women on the boards of directors of large companies.
In addition, the Flexibility And Agility Are key characteristics of emerging governance models. Businesses are adopting more flexible governance structures that allow them to adapt quickly to market changes and new opportunities, for example SAS because of the freedom that this form of company offers in the drafting of its statutes. This trend is particularly visible in start-ups and SMEs, which are often experimenting with less hierarchical and more collaborative governance models.
These innovations show that corporate governance in France is in full transformation, adapting to new economic, technological and societal realities. They reinforce the idea that governance is not just about compliance, it is truly a Strategic Lever for the long-term success of businesses.
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7. FAQS
What are the main roles of the board of directors?
The board of directors defines the company's strategy, oversees its implementation and ensures the establishment of rules that govern governance.
What is the AFEP-MEDEF code?
The AFEP-MEDEF code is a governance code for large listed companies that aims to focus on transparency and the implementation of executive compensation.
How is technology affecting corporate governance?
Digital technology, such as blockchain and AI, helps to implement better transparency, analyze data and optimize decision-making, as does Axiocap to meet the professional needs of legal departments.
What is “comply or explain”?
“Comply or explain” is a principle that allows companies not to follow a specific governance code by explaining the reasons for this alternative implementation.
Why is diversity on boards of directors important?
Diversity on corporate boards enriches perspectives, improves decision-making, and better reflects the types of governance that are representative of stakeholders.
What is the ISO 26000 standard?
The ISO 26000 standard integrates social responsibility into corporate governance that promotes sustainable and ethical practices to be implemented.
How do companies integrate sustainable development into their governance?
To integrate sustainable development into their governance, companies implement long-term strategies, use ESG indices and define performance criteria related to sustainability.
