Organization of effective corporate governance requires establishing clear and standardized accountability, roles, and transparency for all participants. It also helps promote an environment for work that promotes diversity and fairness. These frameworks can be used by many different organizations that range from large corporations to professional associations and families.
The board is responsible for developing and approving corporate plans that produce sustainable long-term values including selecting the CEO and directing management in the operations of the company and distributing capital for investment while assessing and managing risks; and setting the “tone at the top” for ethical conduct. The board typically comprises an assortment of insiders, including major shareholders, founders and executives–and independent directors with experience in managing or directing other large corporations. Independent directors are regarded as beneficial to governance since they don’t have the same connections that typically exist between insiders, which could result in conflicts of conflicts of interest.
The composition of the board is vital because board members often have to deal with technical issues which require a variety of perspectives. Governance experts recommend that boards have at least a majority of independent directors. In addition, tenure and diversity are important in ensuring the board’s effectiveness, especially when discussions are long and filled with strong opinions. The board’s new members can offer fresh perspectives, while those with a longer time on the job can provide continuity and knowledge of the institution.
Additionally, the board is responsible for reviewing, understanding and overseeing the annual operating plan of management and budgets. The board, through its corporate governance committee and nominating committee, will also be in constant contact with major shareholders to identify their views and inform them regularly on issues relevant to the business.
Leave A Comment