Effective corporate governance involves the definition of responsibilities, setting clear operating procedures and defining the roles of the board and committees. This includes clarifying the roles of each organization in relation to one another and ensuring all members have access to important information needed to make informed decisions. A well-developed internal communication strategy that includes regular evaluations is vital to the success of any board.
The primary function of the board is to select, monitor and replace the CEO. It also sets the strategic objectives and supervises executive management team. It also has to keep up-to-date company policies to manage risk, and provide oversight of financial matters.
Having a thorough understanding of the complex business risks is important for effective board governance. It is crucial that the board has a broad range of perspectives represented around the table. This is why many experts in governance prefer boards with a high percentage of independent directors.
Transparency and fairness are important aspects of good corporate governance. The board should treat all contributors such as employees, shareholders, vendors and communities fairly and equally. This fosters dialogue and builds trust among all stakeholders. It helps to promote an integrity culture and discourages counterproductive behaviours like internal corruption or prejudice.
Finally, the board must develop and implement a comprehensive crisis management plan to ensure that the organisation is ready for unexpected incidents. This includes identifying potential risks and developing plans to minimize the risk before they occur. This process is critical to the growth and stability of any company.