You’ll want your board to adhere to the highest standards regarding corporate governance. But it’s not enough to simply check the right boxes and adhere to the minimum requirements. A good board must continuously analyze its own performance in order to discover ways to improve. The best boards are those who excel in this area.
One important best practice for governance is to make it clear for shareholders to understand the board’s role, obligations, and accountability. This includes describing how the board’s compensation aligns with the company’s strategic goals and also defining what this link is considered effective oversight and a solid system of checks and balances.
A clear plan for managing the risks of the business is also crucial. It is crucial to know the risk profile of the business as well as the short- and long-term, as well as collaborate with the board on how it will assess the risks. It also includes ensuring that the board and management are equipped to recognize risk factors, including internal ones such as cultural norms, or poor communication between directors.
It is also crucial to listen to the concerns of shareholders and encourage them to participate. This is especially crucial in the current climate of increasing shareholder activism. For instance, boards should collaborate with shareholders to find and address the issues of shareholder discontent even before the proxy season begins.