The Role of the Board in Corporate Governance

Corporate governance is a set of guidelines, practices and procedures that businesses use to manage themselves. This framework for governance provides the checks and balances that make businesses accountable to their shareholders, employees and other stakeholders.

Different corporate governance models are in use in modern-day business, and each has a distinct impact on the overall efficiency of a company. Some governance systems are more focused on the stock market, whereas others place more emphasis on a company’s customers or its employees.

The primary responsibility of the board is setting the company’s strategy for the long term and making sure that the company is in compliance with legal and ethical standards. The board must also oversee management including the CEO. All directors must be involved and prepared for board meetings.

A structure of committees that is efficient allows the board to study and discuss topics in greater depth than could be during full-board meetings. The board should decide on the functions that should be performed by each committee and also decide on the members of those committees.

The structure of the company’s governance should be fair for all shareholders. This includes avoiding decisions that favor one shareholder group over another. This also includes treating vendors, suppliers and communities with respect.

The role of the board can vary in accordance with the industry and country. In the United States for example, the Securities and Exchange Commission has established a set of best practices for board members on topics such as ESG reporting, cyber security and governance structures. The SEC’s requirements are complemented by guidance on good practice from leading global university centers of excellence in leadership and business management.