When it concerns corporate governance, you’ll want to ensure your board follows best practices for success. It’s not enough, however, to simply tick the right boxes and adhere to the minimum regulations. A well-run board should constantly evaluate its own performance in order to find ways to improve. This is how the best boards stay ahead.
A good practice for governance is to ensure that shareholders know the board’s roles, responsibilities and responsibilities. This includes explaining how the compensation of the board aligns with the company’s strategic goals and defining what constitutes effective oversight as well as a solid system of checks and balances.
A clear and precise framework to manage the risks faced by the company is also essential. This means establishing an understanding of the company’s short – and long-term risk profile and working together to define the way in which the board will assess those risks. It is also about making sure that the management and board are equipped to recognize risk factors, including internal ones such as cultural norms or insufficient communication between directors.
Being aware of shareholders’ concerns is equally important. Encourage participation. This is especially crucial in the current climate of increasing shareholder activism. Boards, for instance, should work with shareholders to proactively recognize and address discontent from shareholders well before the time for proxy season.
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