Corporate Governance Practices
To properly insulate owners from liabilities and claims arising from the conduct of their operating business, it is important to observe the formalities of corporate governance; whether the business entity is a corporation, limited liability company or limited partnership. These formalities are an important administrative task which should not be ignored as creditors of a company seeking to reach the “deep pockets” of its owners may seek to pierce the corporate veil focusing on the lack of distinction between the company and its owners. In order to preserve the separateness, business owners should keep separate accounting records for the company as well as proper minutes and resolutions concerning the activities of the company carried out by its officers and directors, partners or members, as the case may be.
While protecting owners from various types of claims and liabilities is an optimum goal, in order to achieve such objective, a best practices approach, considering the following elements, needs to be developed:
- Ethical Approach (consider fairness to owners, employees, customers and society)
- Agreed Upon Objectives (ensure all interested parties are on the same page)
- Each Party’s Role (owners, executive officers, employees all affect the process)
- Implementation (reflecting the agreed objectives and roles for all concerned)
- Accountability (ensure there is meaningful and transparent feedback to all involved)