Corporate governance is a framework of rules and regulations that governs the leadership, organization, and management of a company. In addition to compliance with laws, rules, and regulations, corporate governance may include compliance with the company’s corporate charter, bylaws, formal policies, customs, and internal processes. The company’s board of directors often directs its corporate governance over a broad range of functions, including financial reporting and disclosures, securities laws, risk management, operating plans and budgets, strategic planning, succession planning, crises management, internal controls, internal audits, preventing foreign corrupt business practices, and executive compensation.
In Texas, corporate governance is primarily governed by the Texas Business Organizations Code (TBOC), which sets forth the legal framework for the formation, operation, and dissolution of various types of business entities, including corporations. The TBOC outlines the roles and responsibilities of corporate directors and officers, shareholder rights, and requirements for corporate bylaws and meetings. Additionally, corporations must comply with federal laws such as the Sarbanes-Oxley Act for financial reporting and disclosures, the Dodd-Frank Act for financial reforms and consumer protection, and the Foreign Corrupt Practices Act to prevent bribery of foreign officials. Texas corporations may also be subject to the rules of the Securities and Exchange Commission (SEC) if their securities are publicly traded. Corporate governance in Texas includes adherence to a company's own charter and bylaws, which often detail the governance structure, director qualifications, meeting procedures, and other internal governance matters. The board of directors is responsible for overseeing the broad range of functions mentioned, ensuring that the company operates within the legal and ethical framework expected of it. Good corporate governance practices are essential for maintaining corporate integrity, investor confidence, and legal compliance.
