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How to Establish Good Self-Monitoring in a Corporation and Its Importance

When running a corporation, there are many nuts and bolts that must be put in place to ensure smooth sailing. One such nut or bolt is a good self-monitoring system which helps ensure that the directors and officers are running the corporation properly. A self-monitoring system protects against unwanted actions by other directors and officers, and protects you against liability. Such a self-monitoring system should also prevent criminal activity within the corporation. It allows all directors and officers to ensure they are fulfilling their duty of care to the shareholders of the corporation. A good self-monitoring program must be reasonably designed, implemented, and enforced. The hallmark is whether the corporation exercised due diligence to prevent and detect criminal conduct by its employees and other agents. To ensure a proper monitoring system is in place, you may want to follow the following seven steps:

  1. Establish standards and procedures capable of reducing criminal conduct. Establishing a set of standards and procedures that all employees and agents must follow reduces the likelihood that employees and agents may stray and engage in criminal conduct.
  2. Assign high-level individuals overall responsibility. Assigning high-level individuals greater shares of responsibility reduces the discretion left in lower-level individuals who have not been as vetted for greater levels of responsibility.
  3. Do not delegate discretionary authority to individuals more likely to engage in illegal activity. Lower level employees may be more likely to stray from procedures, and thus entrusting them with too much discretionary authority may be counterproductive.
  4. Communicate corporate standards and procedures to all. Creating a uniform set of standards and procedures, rather than compartmentalizing or individualizing them, makes it easier for all employees and agents to follow.
  5. Efficient reporting system. In the event of noncompliance and in the worst case scenario, illegal activity, an efficient reporting system allows the corporation to prevent the activity from spreading or worsening.
  6. Enforce standards to achieve compliance through discipline. A good discipline system will ensure that all employees and agents are compliant with the standards and procedures, and enforces that they cannot have free reign to act as they please.
  7. Respond appropriately if offense is detected and prevent future offenses. In the event some illegal activity has occurred, an appropriate response, rather than suppressing the activity, will prevent future offenses from occurring, thus helping the corporation in the long-term.

A good self-monitoring system is crucial in the success of a corporation. It prevents illegal activity from occurring, and enforces rigid procedures for the entire corporation to follow. If you need help ensuring that your self-monitoring system is up to par, contacting a lawyer with years of experience in all matters business-related is in your best interests. Call the Trembly Law Firm at (305) 431-5678 to schedule your consultation.

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