When it is about corporate governance, you’ll want to make sure your board is following best guidelines for success. It’s not enough just to check the boxes or comply with the minimum requirements. A solid board should continuously evaluate its own performance and finding ways to improve. The most effective boards are those which excel in this particular area.
A key best practice in governance is to help shareholders to be aware of the board’s role, duties, and the accountability. This includes explaining how the board’s compensation aligns with the strategic goals of the company as well as defining what is considered effective oversight and a solid system of checks and balances.
A clear strategy for managing the risks of the company is also important. This requires establishing a thorough understanding of the company’s short and long-term risk profile and working together to determine how the board will be assessing the risks. It is also crucial to ensure that the board has the tools necessary to identify risk factors. This includes internal factors, such as cultural rules and poor communication among directors.
Being aware of shareholders’ concerns is equally important. Encourage participation. This is especially important in today’s environment of increased shareholder activism. Boards, for instance, should collaborate with shareholders to find and address the issues of shareholder discontent well before the time for proxy season.
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