You’ll want your board to adhere to the highest standards in the field of corporate governance. It’s not enough just to tick the right boxes or follow the minimum rules. Instead, a strong board should constantly evaluate its own performance to find ways to improve. The most effective effective boards of trustees boards are ones that excel in this field.
A good governance practice is to ensure that shareholders understand the board’s responsibilities, roles and accountability. This includes describing how compensation for the board is aligned with the goals of the company’s strategic plan, as well as defining what is considered effective oversight and an effective system of checks and balances.
A clear plan to manage the risks of a company is also essential. This means developing a knowledge of the company’s short and long-term risk profile and working together to determine the way in which the board will assess those risks. It is also about making sure that the management and the board have the tools to detect risks, including internal factors such as cultural norms or insufficient communication between directors.
Being aware of shareholders’ concerns is equally important. Encourage participation. This is especially crucial in the current context of increasing shareholder activism. For example, boards should collaborate with shareholders to detect and address shareholder discontent even before the proxy season begins.
