The Role of the Board in Corporate Governance

Corporate governance is a set of rules, procedures, and methods that companies use to run themselves. This governance framework provides the checks and balances that hold businesses accountable to their employees, shareholders and other stakeholders.

There are various models of corporate governance in modern business and each one has a distinct influence on the overall effectiveness of a company. Certain governance systems are more focused on the stock market, whereas others are more focused on the company’s customers or its employees.

The main responsibilities of the board are driving the company’s long-term strategic plan and ensuring the company’s ethical and legal compliance. The board should also oversee management, including the CEO. This requires active participation from all directors, as well as the preparation of board meetings.

A structure for committees that is effective allows the board to study and discuss topics more in depth than might be possible during full board meetings. The board must determine which committees will be responsible for the functions they are assigned and the members of each committee.

The company’s structure for governance must be fair to all shareholders. This includes avoiding decisions that favor one shareholder group over one group. Also, it means corporate governance treating suppliers, vendors and communities equally.

The role of the board varies depending on the industry and country. In the United States, for example, the Securities and Exchange Commission (SEC) has created a set of best practices for boards in areas like ESG reporting security, governance and governance structures. The SEC’s requirements are supplemented by the guidance of the top universities around the world for excellence in management and leadership.