Board Governance Facts

Boards have 3 primary roles – to establish policies, make important and strategic decisions, and supervise the company’s activities. A well-written policy can help a board focus its efforts, prevent the duplication of efforts and maintain the essential (but often thin) distinction between oversight and management activity.

Effective boards must be able of identifying and addressing emerging mission-critical issues. This requires access to the most complete and accurate information available. This could include detailed reports on budgets and expenditures, financial statements including quarterly and annual performance results, narrative reports on internal and external operations, and much more. It is vital that a board is aware of and communicates the story told by these numbers.

Board members should be competent to discuss difficult and controversial matters even if it causes 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. The ability to play multiple roles allows directors to have a better overview of the options that are that are available to the board.

Research suggests that although it is widely believed that the best board members possess a high level of personal investment in their company, this is not the situation. For instance, the boards of failed companies and those of highly admired companies had roughly the same percentage of outsiders. The key is the process of making decisions and communicating a company’s strategy and risks, as well as the quality of dialogue.

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