Board Effectiveness and Performance Management

Board of Directors, Board of Trustees, Family/Owner Board and their respective Committees, e.g. Audit, Risk and Compliance, Nomination and Remuneration are all terms that we are used to hearing in most organizations. The terminology often changes depending on the legal structure of the organization.

But who exactly are the Board?

A Board is a group of individuals that are nominated or elected as, or to act as, representatives of the stockholders/the family to establish corporate management related policies and to make decisions on major company issues.

 And what are the responsibilities of the Directors?

Directors have a core, irreducible requirement of involvement in the management of the organization; hence, must take reasonable steps to place themselves in a position to guide and monitor the management of the organization.

So it is not sufficient to rely on previous experiences, but Directors need to acquaint themselves in the operations of the organization and have a fiduciary duty to ensure it is managed to the best interest of the shareholders while complying with regulatory requirements and effectively manage organizational risks.

What should Boards do to enhance their effectiveness?

 The impact to the risk of ineffective boards is amplified in less developed or less mature geographies, where there is limited or any accountability for the performance, or lack of it, of the board members. There are evidences of no apparent correlation between an organization’s performance against its strategic objectives, and the quality and performance of the its Board of Directors.

Hence, it is imperative for organizations to strive for enhancing their overall corporate governance, and in particular Board effectiveness by focusing on a number of key attributes:

• Board composition.
• Specific organizational knowledge.
• Nomination criteria for board members.
• Periodic evaluation of Board performance.
• Periodic evaluation of Board members’ performance.

Whilst periodic Board Performance Evaluations could be conducted as self-assessments, it is recommended that the board evaluation would be carried out by an independent adviser to the Board due to the sensitivity of this matter.

Risktal’s Corporate Governance Services “Our Services” provide Boards of Directors a comprehensive suite of services that will assist you in enhancing the effectiveness of the Board, and better lead your organization to achieve its strategic objectives.

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