Corporate Governance Tips for a Strong Board

You’ll want your board to follow the best practices in corporate governance. It’s not enough to meet the required criteria or meet the minimum regulations. A strong board should constantly review its own performance in order to identify ways to improve. The most effective boards are ones who excel in this area.

A good way to manage governance is to ensure that shareholders know the role of the board, its responsibilities and accountability. This includes describing how the board’s compensation is aligned with the company’s strategic goals and defining what is effective oversight and an effective system of checks and balances.

A clear framework to manage the risks faced by the company is essential as well. This requires establishing a thorough understanding of the company’s short and long-term risk profiles and working together to determine the way in which the board will assess those risks. It is also essential to ensure that the board has the tools necessary to identify potential risks. This is a part of internal factors such as cultural norms and lack of communication between directors.

Being aware of shareholders’ concerns is equally important. Encourage engagement. This is especially important in the current context of increasing shareholder activism. Boards, for instance, should collaborate with shareholders in order to identify and address shareholder discontent even before the proxy season begins.

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