Board Management Principles

Board management principles are best practices which help the board in achieving its governing mission. They include the use of annual assessments to evaluate the performance of a board, appointment of an independent chair, the inclusion of non-management directors in CEO evaluations and the use of executive meetings to discuss sensitive issues, such as conflicts of interest.

The board’s obligation is to take actions that are the best interests of the business and its shareholders. So, while a board must take into account the views of shareholders, its responsibility is to exercise its own independent judgment. A board must also examine the possibility of both long- and short-term risks for the company’s value creation and consider them when evaluating corporate decisionmaking and strategies.

This means that there is no universally applicable model for a board’s structure or composition. Instead boards should be open to experimenting with different models and consider 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 could result in boards that are too closed and unable to tackle the challenges and risks that a company faces. Boards must also be aware that investors are placing more emphasis on environmental social, governance and social issues (ESG). This requires greater flexibility.

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