Board governance is the system by which boards of directors oversee the management of companies. Best practices for board governance are the principles and practices that boards of directors can follow to improve their effectiveness and accountability.
The following are some of the best practices for board governance:
- Have a diverse board. A diverse board is more likely to make sound decisions because it has a variety of perspectives and experiences. The board should have a mix of directors with different skills, experience, and backgrounds.
- Active and engaged directors. Directors should be actively involved in the company and its business. They should attend board meetings regularly and participate in discussions.
- The board should establish committees to oversee specific areas of the company’s business, such as audit, compensation, and risk management. Committees allow the board to delegate some of its responsibilities and focus on its most important strategic oversight role.
- The board should be responsible for setting the compensation of the CEO and other senior executives. The board should ensure that compensation is fair and aligned with the company’s long-term interests.
- Risk management. The board is responsible for overseeing the company’s risk management process. This includes identifying and assessing the company’s risks and developing and implementing strategies to mitigate these risks.
- The board should establish an audit committee to oversee the company’s financial reporting and internal control systems. The audit committee is responsible for ensuring that the company’s financial statements are accurate and that its internal controls are effective.
- Transparency and accountability. The board should be transparent and accountable to shareholders. The board should communicate regularly with shareholders and provide them with information about the company’s performance and governance practices.
The Canadian Code of Corporate Governance (CCCG) is a set of guidelines that recommends best practices for board governance. The CCCG is a valuable resource for boards of directors as they strive to improve their governance practices.
By following the best practices for board governance, boards can help to improve their effectiveness, accountability, and transparency. This can lead to better decision-making, improved performance, and a stronger reputation for the company.
This article is for informational purposes only and is not legal advice. Contact us today to discuss your specific situation.