The Role of the Board in Corporate Governance
Corporate governance is a set of guidelines, practices and procedures that companies use to manage themselves. The framework of governance establishes the checks and balances that make companies accountable to their employees, shareholders and other stakeholders.
Corporate governance models differ in today’s business world, and they all have distinct effects on the performance of a company. Some governance systems are more focused on the stock market, whereas others focus more on the company’s clients or its employees.
The primary duties of the board include establishing the company’s strategic vision over the long term, and ensuring compliance with ethical and legal standards. The board must also oversee management including the CEO. This requires active participation from all directors and preparation for board meetings.
A well-functioning structure for committees allows the board to consider and discuss issues in greater depth than can be done in full-board meetings. The board should decide which committees will be responsible for what functions and the members of each committee.
The management structure of a business must be fair to all its shareholders. This means avoiding actions that favor one group of shareholders over another. This also includes treating vendors, suppliers and communities in a fair way.
The role of the board is different in accordance with the industry and country. In the United States for example, the Securities and Exchange Commission has established a set of best practices for board members on topics such as ESG reporting and cyber security as well as governance structures. The SEC’s requirements have been complemented by good practice guidance from the world’s top university centers of excellence in leadership and business management.
