The Role of the Board in Corporate Governance
Corporate governance is the system of rules, practices and procedures that companies employ to manage themselves. This framework of governance provides checks and balances that make businesses accountable to their shareholders, employees and other stakeholders.
There are various models of corporate governance in contemporary business and each model has a distinct impact on the overall performance of a company. Certain governance systems focus more on the stock market, whereas others are more focused on the company’s clients or its employees.
The main responsibilities of the board are setting the company’s long-term strategy and ensuring legal and ethical compliance. The board should be able to oversee management including the CEO. This requires active participation by all directors and the preparation of board meetings.
A structure of committees that is efficient allows the board to look at and discuss topics more thoroughly than might be possible during full board meetings. The board must decide which committees will be responsible for what tasks and who will sit on each committee.
A company’s governance system should be fair to all shareholders. This means avoiding actions that favor one group of shareholders over one group. This also includes treating suppliers, vendors and communities equally.
The role of the board in corporate governance varies by industry and country. In the United States for example, the Securities and Exchange Commission has established a set of best practices for board members in areas such ESG reporting as well as cyber security and governance structures. The SEC’s requirements are supplemented by guidance for good practice from top universities worldwide https://dailyboardroom.com/how-to-prepare-for-the-service-of-a-data-room-for-deals/ centers of excellence in leadership and business management.