Business success is often defined by the way an organization is governed and that’s the term corporate governance. Basically, corporate governance is about ownership and control and is formally defined as a system of rules, practices, and processes by which an organization is directed and controlled. According to the Organisation for Economic Co-operation and Development (OECD), good corporate governance helps to build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies. For example, the board of directors should critically emphasize the need for integrity and ethical values. Thus, the principles of good governance includes; Transparency; whereby such information as financial performance and conflict of interests should be communicated to all stakeholders accurately and in a timely manner. Accountability; the board should be able to inform stakeholders the purpose of organization activities and own their outcomes. Responsibility; the shareholders appoint the board of directors so that it can have oversight on the organization matters and management activities, and fairness meaning there should be equal consideration for all. In Rwanda, there are several mechanisms that help business organizations to establish a system of good governance. Firstly, is the Rwanda Development Board (RDB), the body that is charged with sole responsibility of business entities register general as one of the core functions. The RDB requires that all corporates’ changes and secretarial annual returns are filed by the seventh month for example. Secondly is the Rwanda Companies Act, which is the Law governs companies in Rwanda, currently famously referred to as Law N° 007/2021 of 05/02/2021 Governing Companies. The Companies law has laid out details for example the chapters concerning the shareholders’ rights, liabilities, powers and meetings and management and administration. Good governance in an organization is characterized by several things among others; having clearly defined roles for the management and the board of directors. Appointment of capable directors, having persons of integrity and diverse skills greatly enhances board performance. In the same line checking that the management and members of the board do not abuse their powers, for example through conflict of interest. Good governance is also evidenced by provision of accurate and relevant information to various stakeholders for timely decision making. Key challenges hindering good governance starts from how well the board constituted, for example a determination of whether a representation of relevant skills is made. There is a lack of diversity especially in the form of skills, gender etc to ensure independence, vibrance and wider views. There also lacks board independence and performance reviews. Effective boards should have independent directors who are able to supervise company management and independent committees for the benefit of shareholders. Finally, a lack of auditor independence and transparency is a huge fault on good governance. Accounting issues should be handled in a transparent manner, with complete, detailed information and reports always available to the board and remedial actions put in place to prevent recurrence of any questionable findings. The writer is the Audit Director at BDO Rwanda
