Board Governance Best Practices
Best practices for governance of boards will help a board excel in its duties as an oversight body. These include having directors from different backgrounds, maintaining an appropriate committee structure and size, and encouraging an open and honest board meeting setting. The most important aspect of all these is ensuring that the roles and responsibilities of the board are clearly defined.
Often, the first step is to develop matrixes that outline the distinct responsibilities of each director and the executive team. These matrices will be reviewed and constantly updated. Based on the specific requirements of each company, the best practices could also include a diversity criteria, which aims to ensure that boards are comprised of members that are different in terms of gender, age, ethnicity and tenure.
Another crucial aspect of this 21st century best practice is making sure that the board’s strategy and goals are aligned with those of the business. This is a complex task that requires the full attention of the board. The board must create governance policies that permit it to function as an enabler instead of a stifler for the executive team.
Boards should also create an internal framework to assess risks and their impact on performance. They should evaluate all possible risks against the probability of success and the cost. You can ask the management team to provide opinions on the degree of risk that the company will accept. In the end, a board must work together to review all of the relevant information, take a decision and develop a plan for managing risk.