Good corporate governance emphasizes the integrity and efficiency of an organization and promotes economic growth and financial stability. So, how should boards improve their corporate governance? Corporate governance best practices offer board members the most effective guidelines in bringing strategic value to their organizations. In this article at IMD, the author shares some best practices that you must implement to optimize your board’s effectiveness.
Optimizing the Board’s Effectiveness
Boards have a significant role to play in the formulation and adoption of the organization’s strategic direction. “The board can help a company reach its goals by ensuring effective strategy through corporate governance best practices,” explains the author. Business leaders must ask themselves the following questions:
- Are strategies in alignment with the organization’s goals?
- What approaches are implemented to manage risks effectively?
- Are appropriate resources available to implement corporate best practices?
Besides, transparent communication is crucial to earn stakeholder trust and legal requirements.
Governance is Not Just About Compliance
Boards must elaborate on their position and understanding of the primary functions they perform. Knowing the board’s role and who does what in relation to governance goes a long way in maintaining a good relationship between the board and management.
Set Clear Goals
Successful boards must provide a strong leadership structure. Companies must set clear, common goals to move in the same direction. In fact, corporate governance must be designed in such a way that it ensures a coherent business direction that will help in eliminating inefficiencies. Further, it must win the confidence of stakeholders shareholders, employees, and customers.
Evaluate the Performance
Boards must be aware of their strengths and weakness to govern effectively. A Board must address the shortcomings through director development programs and enhance its governance processes. Boards must:
- Use performance metrics
- Implement conflict mitigation strategies
- Establish clear communication with stakeholders
Implementing these best practices is a worthwhile process, not only because it enhances operational efficiency but also helps in improving business performance. To read the original article, click on https://www.imd.org/hpb/corporate-reflections/corporate-governance-best-practices/.