The Role of the Board in Corporate Governance

The Role of the Board in Corporate Governance

Corporate governance refers to the system of rules, procedures, and practices that businesses employ to manage themselves. This governance framework provides the checks and balances that hold businesses accountable to their shareholders, employees and other stakeholders.

Corporate governance models vary in the current business environment, and they all have an impact on the efficiency of a firm. Certain governance models focus more on the stock market, while others focus more on a company’s customers or employees.

The board’s primary responsibilities include establishing the company’s strategic vision for the long-term and ensuring compliance with legal and ethical standards. The board should also oversee management and the CEO. All directors should be involved and ready for board meetings.

A structure of committees that is efficient allows the board to study and discuss topics in greater depth than might be possible during full board meetings. The board should decide on the tasks to be carried out by each committee and also decide on the members of those committees.

A company’s governance important site structure should be fair to all its shareholders. This includes avoiding decisions that favor one group of shareholders over another. Also, it means treating suppliers, vendors and communities fairly.

The role of the board is different in accordance with the industry and country. In the United States for example, the Securities and Exchange Commission has created a set of best practices for board members to use in areas such as ESG reporting as well as cyber security and governance structures. The SEC’s requirements are supplemented by the guidance of top universities worldwide for excellence in leadership and management.