Organization of effective corporate governance is about defining the roles and establishing clear operating practices for the board, committees, and CEO. Determining the roles of each group with respect to each other and making sure that all members have access important information that allows them to make informed decisions are an integral part of this. A solid internal communication strategy that includes regular evaluations is vital to the success of any board.
The job of a board is to appoint, monitor and replace the CEO, determine strategic objectives and oversee the executive management team. It is also accountable to revise company policies to manage risk, and provide oversight of financial matters.
Effective governance of boards requires a deep understanding of the complex nature of business risks. It is crucial that the board has a broad spectrum of perspectives at the table. This is one reason why many experts in governance prefer boards with a high percentage of independent directors.
Transparency and fairness are also essential aspects of a good corporate governance. The board must treat all contributors, including employees, shareholders community members, vendors and employees fairly and equally. This fosters a dialogue and builds confidence between all stakeholders. It also encourages a culture that is based on honesty and deters counterproductive practices like internal corruption and prejudices.
The board should also develop and maintain an extensive crisis management strategy to prepare the organization for unexpected events. This involves identifying risks and preparing plans to minimize them prior to when they happen. This process is critical to the long-term growth and stability of any company.
