Corporate Governance | 3 mins read

Corporate Governance Impact on Restaurants

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Cynthia Vespia

By Cynthia Vespia

What is Corporate Governance?

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Corporate governance is a set of governance guidelines and processes by which an organization directs business conduct. The management board for corporate governance involves the company's stakeholders, executives, upper management, and financiers.

The framework for corporate governance includes balancing financial interest and assessing the company's main objectives. Board composition will encompass action plans, an annual meeting, governance guidelines and performance measures.

Understanding Corporate Governance
Corporate governance guidelines encompass a set of rules and resolutions to oversee business conduct and corporate behavior. Shareholders and proxy advisors indirectly affect the corporate governance but aren't directly involved in the governance itself. However, board committees have great impact for equity valuation in governance issues.

A company's corporate governance will highlight the integrity of the business which looks good to investors. By building trust with investors, corporate governance can increase financial viability. This enables a long term opportunity for market participants to invest in the company.

Open communication of a firm's corporate governance will be key to creating community and investor relations. Most companies focus on reaching a high level of corporate governance guidelines that are meticulously followed.

  • Corporate governance is the accumulation of rules, standards and processed used within a company to regulate compliance.
  • A board committee is a company's primary director of influence for corporate governance.
  • Corporate governance encompasses ethical behavior, environmental awareness, compensation, corporate strategy, compensation, and risk management.
  • Transparency, accountability, responsibility, and fairness are the basic principles surrounding corporate governance.

Why is Corporate Governance Needed for Restaurant Survival?

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Like any company, a restaurant needs good corporate governance guidelines in place to be successful. A corporate government system will involve the preparation of legal documents that govern relationships between a chief executive officer, independent directors, and shareholders.

Business and financial activities are recorded to ensure statutes are being adhered to. Transparency of company dealings is paramount to the overall and continued success of the company.

The restaurant and foodservice industry often lacks an understanding of having good corporate governance. Most new restaurants fail to learn the applicable laws and regulations that need to be followed within this specific business sector.

When owning and operating a restaurant, there should be a clear understanding of what restaurant regulatory compliance entails. The first year of a restaurant's opening can make or break the business. Therefore, corporate governance programs will provide an analysis of any compliance risks and how to adjust for them. This approach can often be streamlined by using compliance regulatory software.

The Benefits of Good Corporate Governance
A strong corporate governance framework coupled with positive corporate culture within the company will apply for benefits throughout. Compliance risks and other factors are controlled, procedures are clearly outlined, and remain consistent. Other benefits include-

These benefits include-

  • More efficient process procedure for task consistency.
  • Repeatable errors are more visible and highlighted within the processes to quickly assess.
  • Eliminates waste and reduced costs as inefficient prospects are ruled out.
  • Operations run smoother as they must be labeled as conforming or non-conform.
  • Using corporate governance almost assures compliance is met and products reach the marketplace the way they are intended.
Corporate governance can have a positive impact that reaches farther throughout the business as well. Fostering good governance creates a culture of excellence throughout.

As leadership defines business conduct and behavior in the workforce, the culture is defined throughout the chain of command. This exemplifies the reputation of the company as good governance delivers products that excel which leads to business performance rising. The reputation of a restaurant in the market can make or break its success.

Any organization can have issues arise with nonconformities and compliance risks. When the company has good corporate governance they can track and isolate these issues before they have a broader impact.

Good governance creates financial sustainability and reduces the threat of legal impact which can warrant concerns from outside parties, shareholders, and investors. Having corporate governance for any company within the food service industry is erring on the side of caution.

Conclusion to Corporate Governance

  • Detailed communicative efforts of corporate governance is a key measure for building investor relations within the community. Therefore, most industry level companies strive to maintain high corporate governance.
  • A lot of shareholders expect more than profitability from a company. They also need to see demonstrable effort towards good corporate citizenship, environmental awareness, ethical behavior, and sound corporate governance practices.
  • Good corporate governance highlights the governance guidelines set forth within the company and the aligned incentives.