Most corporate boards are still suffering from a severe lack of diversity. The lack of diversity remains persistent even though the board members are adaptable to change and agile mindsets.
In this article at Effective Governance, the author explains that good governance is more about boosting stakeholders’ returns as opposed to optimizing their value. An ideal picture of corporate governance is when an organization progresses smoothly without cutting corners with the shareholders, vendors, clients, and workers.
Striding towards Improvement
It is the responsibility of board members to tackle the flaws uncovered in board reviews via director development programs and enhance their governance processes. However, improvements in the areas mentioned below are equally pivotal. Take a look:
- More Than Compliance: Good corporate governance is about the implementation of legislation, regulation, and codes of practice. So, focus on improving the organization’s performance through strategy formulation and policy making.
- Board’s Role in Strategy: A board member plays a significant role in the creation and adoption of strategic decisions in the organization. Thus, each board must establish its liabilities to undertake and clarify their strategic choices with management.
- Monitor Performance: By identifying the organization’s key performance drivers, the board can establish suitable measures to achieve success. The board of directors must create an agreed format for the reports they monitor.
- Board Employs the CEO: The board members are responsible for appointing, reviewing, working, or even replacing the CEO. Their relationship with the CEO of the company is crucial. So, they need to carefully select the right candidate for the role of a CEO who can determine the organization’s strategic direction.
- Governance of Risk: The board members are bound to establish practical risk management and internal control system to improve the decision-making process. It will also help in developing an in-depth insight into the risk-reward trade-offs faced by the organization.
- Informed Directors: The well-informed directors can take better decisions. So, the CEO or management team must share all their decisions with the board. Regular briefings, team presentations, website visits, or even individual director development programs are some smart ways to keep everyone well informed.
- Infrastructure: To maintain a seamless line of responsibility between board and management, the board members must develop policies to delegations. Lack of internal processes and procedures may lead to ineffective access to information and unacquainted decision-making.
- Competent Chairperson: Being the leader of the board, the chairperson must determine strong and acknowledged governance ability, a healthy rapport with the CEO, and skills to lead decision-making processes. So, carefully appoint an eligible chairperson.
- Skills-Based Board: The board must have a clear understanding of the skills required to ensure the right balance between directors’ experience with specialists’ perspective.
- Pursue Opportunities for Improvement: By regularly assessing the performance of individual directors, the board can improve its capability. The evaluation may include diverse areas as board processes, director skills, competencies, or even boardroom relationships.
Click on the following link to read the original article: https://www.effectivegovernance.com.au/top-ten-steps-to-improving-corporate-governance/