Corporate Governance Tips for a Strong Board

You’ll want your board to adhere to the highest standards regarding corporate governance. It’s not enough just to tick the appropriate boxes or comply with the minimum requirements. A good board must continuously review its own performance in order to find ways to improve. The most effective boards are ones that excel in this field.

One important governance best practice is to clearly communicate with shareholders to be aware of the role of the board, its responsibility, and accountability. This includes describing the aligning of the board’s compensation to the company’s goals, and defining what constitutes a successful system of oversight and checks and balances.

A clear plan for managing the risks of a company is essential as well. It is crucial to know the risk profile of the business, both short- as well as long-term, and collaborate with the board on the best way to assess these risks. It also includes ensuring that the board and management have the tools to detect the risks, which could include internal factors such as cultural norms or lack of communication between directors.

It is also crucial to listen to concerns of shareholders and encourage engagement. This is especially important in the current environment of increased shareholder activism. Boards must, for instance engage with shareholders in order to find and resolve concerns among shareholders well before the beginning of the proxy season.