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You’ll want your board to adhere to the highest standards when it comes to corporate governance. It’s not enough just to meet the required criteria or adhere to the minimum standards. Instead, a strong board must be constantly evaluating its own performance to discover ways to improve. The most effective boards are ones which excel in this particular area.
One important best practice for governance is to make it clear for investors to understand the role of the board, its duties, and the accountability. This includes explaining how the board’s compensation is aligned with the company’s strategic goals and also defining what constitutes effective oversight as well as a robust system of checks and balances.
A clear plan for managing the risks of the company is also essential. It is crucial to know the risk profile of the company both in the short- as well as long-term, and work together with the board on the best way to assess these risks. This also means ensuring that management and the board have the tools to identify the risks, which could include internal factors such as cultural norms or lack of communication between directors.
Being attentive to shareholder concerns is also important. Encourage engagement. This is especially crucial in the current climate of increased shareholder activism. Boards should, for example collaborate with shareholders to determine and address any shareholder discontent long before the proxy season begins.