The success of a business is contingent on the policies that satisfy the requirements of stakeholders, investors and managers. Corporate governance is the foundation for how businesses develop and implement their policies. Effective governance is more vital now than ever in a world of ever-changing demands and expectations.
Corporate governance is only effective when the culture, values and mission of the company are understood. It is also necessary to have systems in place which allow companies to recognize and limit risks before they occur. This includes establishing guidelines for conduct, a system for reporting and regulating conflicts of interests.
The board of directors has to ensure transparency, openness, and accountability to all external and internal stakeholders. The board is accountable for ensuring that the company’s assets are utilized in a manner that creates value for long-term shareholders. This is accomplished by an assessment of risks, developing and implement risk management strategies, and evaluating the performance against targets.
Boards should think about the appointment of an independent director who is the lead (also known as the presiding Director) to ensure that they are running their boards in a non-partisan manner. This is especially crucial when the company has a CEO and chair position. Boards should include non-management members as part of the evaluations of CEOs, if appropriate, and evaluate senior management’s overall performance.
The board should regularly engage with shareholders and other stakeholders on issues that impact the company’s long-term value creation, even if they are not necessarily in the position of directly influencing the corporate strategy or decision-making process. It should encourage shareholders who wish to influence corporate decisions to publicly disclose their ownership and identity, in the event that federal securities laws allow it.
http://www.theirboardroom.com/board-collaboration-and-communication
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