We have read about the importance of good governance in this article. Now we shall look at a few ways to improve Corporate Governance of your company –
1. Understand that good governance is not limited to compliance
Conformity (i.e. compliance with legislation, regulation and codes of practice) has to balance itself with performance. This is the job of the Board. One can achieve this by robust strategy and policies. The Board needs to elaborate its position and understanding of the major functions it performs as opposed to those performed by management.
Knowing the role of the board and the duties with respect to governance will take the company a long way towards maintaining a good relationship between all the stakeholders This also increases a culture of trust in the company.
2. Board’s role should be clearly defined in every strategy
We all know that the Board plays a significant role in the formulation and adoption of the organisation’s strategic direction. When the company has the backing of Board along with management, it can reach new heights. Each board must determine what role is appropriate for it to undertake and clarify this understanding with management to avoid miscommunication and hassles.
3. Monitor and review performance of the company
This is an essential function of the Board. It helps ensure legal compliance and is a major aspect of the board’s monitoring role. The corporate decision making should be consistent with the objective set by the company. It should also meet the owners’ expectations. One can achieve this by setting KPIs (key performance indicators) and establishing appropriate measures for determining success. As a Board, they should have a standard format for the reports they monitor to ensure that all matters that should be reported are in fact reported.
4. The CEO is the responsibility of the Board
One of the most important functions of the Board is to find and appoint a competent CEO. They should continuously review and monitor the CEO. This relationship is crucial to effective corporate governance because it is the link between the board’s role in determining the organisation’s strategic direction and management’s role in achieving corporate objectives.
5. Do not ignore the Governance of risk should
Risk management starts with recognizing the risks. The oversight and management of internal controls is another fundamental role of the Board. Effective and robust risk management policies always supports better decision making because it develops a deeper insight into the risk-reward trade-offs that all organisations face.
6. Important information should reach the Board regularly
Better information results in good decisions. Briefings, presentations, site visits, individual director development programs, and so on can all provide directors with additional information. Above all, directors need to be able to find answers to the questions they have, so an access to independent professional advice policy is recommended.
7. Need of an effective governance infrastructure
Policies and procedures which guide ethical behavior should form the base of any organizational behavior. Ensure delineation of the line of responsibility between board and management. It is particularly important for the board to develop policies in relation to segregation of duties. Poor internal processes and procedures can lead to inadequate access to information, poor communication and uninformed decision making, resulting in a high level of dissatisfaction among directors. Also, tools like VComply help the company to have a robust governance structure.
8. A competent chairperson of the Board
The chairman of the Board creates the required culture and trust required in an organization. The “leader” of the Board should demonstrate leadership abilities, sharp acumen and strong professional ethics. Thus, it helps them establish a sound relationship with the CEO, and have the capacity to conduct meetings and lead group decision-making processes.
9. Focus on skills of the Board members
The Board members represent an appropriate balance between of experience and knowledge of the organisation. The directors with specialist expertise or fresh perspective should also be prevalent. Directors should also be seen for the additional qualities they possess, their “behavioral competencies”. Moreover, these qualities will influence the relationships around the boardroom table, between the board and management, and between directors and key stakeholders.
10. Evaluation of the Board for its performance to enable continuous improvement
The Board must be aware of their own strengths and weaknesses to improve when needed. For this, the assesses their own performance on a regular basis. It should be highly critical of itself and take immediate actions that come out of the evaluation. Also, the Board should consider addressing weaknesses uncovered in board evaluations through director development programs and enhancing their governance processes.Add to favorites