Board Management Principles

Board management principles are a collection of best practices that aid the board fulfill its governing mission. They include the use of annual assessments to examine the board’s performance, the appointment of an independent chair, the inclusion of nonmanagement directors in CEO evaluations as well as the use of executive sessions for discussions of sensitive issues, such as conflicts of conflicts of interest.

A board has a duty to act in the best interest of the business, and its shareholders over the long run. Thus, while a company’s board must consider the opinions of shareholders, its duty is to use its own independent judgment. A board must also examine the risks that could impact the company’s ability to generate value in the short and long-term, and weigh these factors when reviewing corporate strategies and decisions.

As a result, there is no one-size-fits-all model for a board’s design and composition. Instead boards should be open to experimenting with different models and thinking about how each might impact the board’s overall efficiency.

Some boards are prone to adopting a geographic or special-interest-group representation model in which each director is perceived to represent the views of individuals located in a particular geographical area. This can result in boards that are too insular and unable to effectively tackle risks and issues that confront the company. Boards should be aware of the increasing focus on governance, environmental and social (ESG) concerns by investors demands that they be more flexible than they were in the past.

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