Board Governance Facts

The primary role of boards is – to establish policies, to make significant and strategic decisions, and to supervise the company’s activities. Written policies can help a board to focus its efforts, avoid repetition of efforts and help maintain the vital (but often thin) distinction between oversight and management activity.

Effective boards should be able to recognize and addressing the ever-changing mission-critical issues. To accomplish this, boards should have access to as much exact and complete information as is possible. This could include detailed reports on budgets and expenditures as well as financial statements, quarterly and annual performance results as well as narrative reports about internal operations and programs and more. It is essential for a board to be competent in communicating the story told by these reports.

Board members must be able to discuss difficult and controversial matters, even if it creates tension within the group. It’s important for directors to have the freedom to challenge one another and play a variety of roles on the board – the ruthless cost cutter, the damn-the-details big picture guy, or the split-the-differences peacemaker. Directors can gain a better understanding of the options available to them by playing various roles.

Research suggests that while it is commonly assumed that good board members have a significant amount of personal investment in their company however this isn’t the situation. The boards of both failed companies and highly admired corporations, for instance, had roughly the exact same percentage of outsiders. The key appears to be in the process of discerning and communicating the company’s risk and strategy and in the quality of dialogue and discussion.

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