empty corporate boardroom

What is Corporate Governance & Compliance?

Corporate governance practices are the rules, policies and procedures established by the corporate officers at the helm of a company to direct its activities and manage risk. 

Good corporate governance policies ensure that the strategies and directives developed under the corporate veil meet the ethical standards and fiduciary duties of the company’s compliance environment. 

Compliance, in contrast to corporate governance, refers to meeting a company’s legal and regulatory compliance requirements as dictated by their industry, activities and jurisdiction.


Principle vs. Practice

If corporate governance are the principles that guide action, corporate compliance is the group of practical actions required to participate in the business environment. This means making sure that business practices line up with government mandates, which often requires consultation with outside specialists. 

For example, technical areas, such as financial reporting, tax filing and tax record maintenance is normally contracted out to a tax specialist with pertinent expertise, rather than overburdening internal departments. According to the stock exchange listing requirements in the Securities Exchange Act, it is mandatory for companies to develop and enforce insider trading policies, which requires highly specific legal expertise that few companies have in house. 

Corporate governance and compliance are closely linked, as they usually fall under the umbrella term of governance, risk management and compliance (GRC). However, they are each different components of corporate success in both private and public companies.


Differences Between Governance and Compliance

composite image of silhouette checking off corporate governance compliance checklist

The common links and differences between corporate governance and compliance requirements are best thought of as minding corporate interests from different perspectives. 

Corporate governance takes a long-term view, focusing on improving business performance in the future. Compliance considerations are much more practical in nature, as companies can have a wide variety of rules and regulations to comply with in order to offer their products or services. 

Another way of looking at these two facets of business is that governance policies are created by corporate board members to protect the current and future interests of shareholders. Compliance policies, in contrast, are required so that businesses can meet regulatory requirements and operate without running afoul of the law. 

Essentially, governance policies are important, but not absolutely necessary, while corporate compliance is an absolute necessity to avoid potentially crippling legal actions or penalties.


Corporate Governance Structure & Principles

large meeting table with open laptops

Depending on the age and scale of a particular company, it could have a variety of different governance matters to contend with. For example, businesses in financial distress or bankruptcy have vastly different concerns from a fast-growing startup. 

No matter the situation, companies must be prepared to handle many different types of issues. 

Developing the corporate governance framework can involve drawing on input from proxy advisory firms and other stakeholders, but most of this responsibility lies with senior executives. Good corporate governance policies include:

  • Mechanisms for oversight and reporting of company performance
  • A clearly defined relationship between senior executives and the corporate president or chief executive officer, as well as their division of responsibilities
  • Rules surrounding the appointment of corporate directors
  • Guidelines for the ethical tone of company conduct 
  • Rules for internal and external communications, including financial reporting


Corporate Compliance Considerations

hand holding pen, writing out compliance related terms

In today’s financial environment, tax considerations are more challenging and complex than ever before. Add to that the multitude of different regulatory agencies that oversee business in the United States alone, and companies can quickly find themselves in a frustrating and complex web of red tape. 

Simply put, companies must maintain sufficient records to demonstrate that they are conducting business in keeping with all required laws and regulations. In practice, this documentation can include:

  • Articles of incorporation
  • Minutes from annual shareholder and director meetings
  • Stock owner, dividend & transaction information 
  • Records of corporate governance resolutions 
  • List of corporate transactions & service providers
  • Tax records
  • Additional documents required by local or industry authorities


TPI Group – Your Ally for Corporate Tax Compliance

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At TPI Group, our team of talented tax professionals brings a wealth of experience to the table. If you are in need of assistance with corporate tax compliance, our business accounting team can handle anything from planning to audits and everything in between. Our services include:

  • Payroll services
  • Streamlined Record Keeping 
  • Cash Flow Analysis 
  • Financial Forecasts 
  • Year-end planning
  • Tax Planning & Minimization
  • IRS Representation
  • Litigation Support and Forensic Analysis
  • Business Valuation

Want to learn more? Simply call (703-288-1998), email (info@tpigroupinc.com) or click here to contact us.