The Role of the Board in Corporate Governance
Corporate governance is a set of rules, procedures, and methods that companies use to manage themselves. The framework of governance establishes the checks and balances that make companies accountable to their employees, shareholders and other stakeholders.
There are various models of corporate governance in modern-day business and each model has a distinct influence on the overall effectiveness of a company. Certain governance models focus more on the stock market, while others focus more on the company’s clients or employees.
The board’s primary responsibilities include setting the company’s vision for the long term and making sure that it is in that the company is in compliance with ethical and legal standards. The board must also supervise management including the CEO. All directors should be involved and prepared for board meeting.
A structure of committees that is efficient allows the board to look at and discuss issues more thoroughly than might be possible during full board meetings. The board should decide on the tasks to be assigned to each committee and also decide on the members of the committees.
The structure of a company’s governance should be fair to all its shareholders. This includes avoiding decisions that favor one shareholder group over one group. It also means treating vendors, suppliers and communities with respect.
The role of the board in corporate governance differs according to industry and country. In the United States, for example, the Securities and Exchange Commission (SEC) has developed a set of best practices for boards in areas like ESG reporting, cybersecurity and governance structures. The SEC’s requirements are supplemented by good practice guidance from world-class university centers of excellence in business and leadership.