An effective system of governance framework provides the rules within which the board and management address their key responsibilities.
A corporation’s business is under the board’s oversight. The board’s role is to monitor certain key matters, including the relationship with the outside auditor and executive compensation. The board’s oversight function encompasses a number of responsibilities, including:
Selecting the CEO
The board selects and oversees the performance of the company’s CEO and oversees the CEO succession planning process.
Setting the “culture at the top.”
The board should set a “tone at the top” that demonstrates the company’s commitment to integrity and legal compliance. This tone lays the groundwork for a corporate culture that is communicated to personnel at all levels of the organization.
Approving and monitoring the corporate strategy
The board should have meaningful input into the company’s long-term strategy from development through execution, should approve the company’s strategic plans and should regularly evaluate implementation of the plans that are designed to create long-term value. They should understand the risks inherent in the company’s strategic plans and how those risks are being managed.
Setting the company’s risk structure and management processes.
The board oversees the process for identifying and managing the significant risks facing the company. The senior management and the board should agree on the company’s risk appetite. They should be comfortable that the strategic plans are consistent with it. After that, one should establish a structure for overseeing risk, delegating responsibility to committees and overseeing the designation of senior management responsible for risk management.
Focusing on the integrity of the company’s value system
The board’s role is to satisfy that the company’s financial statements accurately present its financial condition and results of operations. They have to ensure that other disclosures about the company’s performance convey meaningful information about past results as well as future plans. They should ensure that the design of the company’s internal controls and procedures is suitable to detect and deter fraudulent activity.
Deciding the capital structure
The board’s role is to have meaningful input and decision making authority over the company’s capital allocation process and strategy. Also, they need to find the right balance between short-term and long-term economic returns for its shareholders.
Reviewing, understanding and overseeing annual operating plans and budgets.
The board oversees the annual operating plans and reviews annual budgets presented by management. Moreover, the board monitors implementation of the annual plans and assesses whether they are responsive to changing conditions.
Reviewing the company’s plans for business resiliency.
As part of its risk oversight function, the board periodically reviews management’s plans to address business resiliency, including such items as business continuity, physical security, cyber-security and crisis management.
Nominating directors and committee members, and overseeing effective corporate governance.
The board, under the leadership of its nominating/corporate governance committee, nominates directors and committee members. Also, they oversee the structure, composition (including independence and diversity), succession planning, practices and evaluation of its committees.
Overseeing the compliance program
The board, under the leadership of appropriate committees, oversees the company’s compliance program and remains informed about any significant compliance issues that may arise. VComply is one such program which helps them to monitor and implement all their GRC related issues using a single integrated platform.Add to favorites