Ghana Has a New Companies Act – The Companies Act 2019 (ACT 992)June 12, 2020
Cold Calling Tip: The 100 Calls MethodSeptember 29, 2020
- Recognise that good governance is not just about compliance: Boards need to balance conformance (i.e. compliance with legislation, regulation and codes of practice) with performance aspects of the board’s work (i.e. improving the performance of the organization through strategy formulation and policy making). As a part of this process, a board needs to elaborate its position and understanding of the major functions it performs as opposed to those performed by management. These specifics will vary from board to board. Knowing the role of the board and who does what in relation to governance goes a long way towards maintaining a good relationship between the board and management.
- Clarify the board’s role in strategy: It is generally accepted today that the board has a significant role to play in the formulation and adoption of the organization’s strategic direction. The extent of the board’s contribution to strategy will range from approval at one end to development at the other. Each board must determine what role is appropriate for it to undertake and clarify this understanding with management.
- Monitor organizational performance: Monitoring organizational performance is an essential board function and ensuring legal compliance is a major aspect of the board’s monitoring role. It ensures that corporate decision making is consistent with the strategy of the organization and with owners’ expectations. This is best done by identifying the organization’s key performance drivers and establishing appropriate measures for determining success. As a board, the directors should establish an agreed format for the reports they monitor to ensure that all matters that should be reported are in fact reported.
- Understand that the board employs the CEO: In most cases, one of the major functions of the board is to appoint, review, work through, and replace (when necessary), the CEO. The board / CEO relationship is crucial to effective corporate governance because it is the link between the board’s role in determining the organization’s strategic direction and management’s role in achieving corporate objectives.
- Recognize that the governance of risk is a board responsibility: Establishing a sound system of risk oversight and management and internal control is another fundamental role of the board. Effective risk management supports better decision making because it develops a deeper insight into the risk-reward trade-offs that all organizations face.
- Ensure the directors have the information they need: Better information means better decisions. Regular board papers will provide directors or advisors with information that the CEO or management team has decided they need. But directors or advisors do not all have the same informational requirements, since they differ in their knowledge, skills, and experience. Briefings, presentations, site visits, individual director development programs, and so on can all provide them with additional information. Above all, directors or advisors need to be able to find answers to the questions they have, so an access to independent professional advice policy is recommended.
- Build and maintain an effective governance infrastructure: Since the board is ultimately responsible for all the actions and decisions of an organization, it will need to have in place specific policies to guide organizational behavior. To ensure that the line of responsibility between board and management is clearly delineated, it is particularly important for the board to develop policies in relation to delegations. Also, under this topic are processes and procedures. Poor internal processes and procedures can lead to inadequate access to information, poor communication and uninformed decision making, resulting in a high level of dissatisfaction among directors. Enhancements to board meeting processes, meeting agendas, board papers and the board’s committee structure can often make the difference between a mediocre board and a high performing board.
- Appoint a competent chairperson: Research has shown that board structure and formal governance regulations are less important in preventing governance breaches and corporate wrongdoing than the culture and trust created by the chairperson. As the “leader” of the board, the chairperson should demonstrate strong and acknowledged leadership ability, the ability to establish a sound relationship with the CEO, and have the capacity to conduct meetings and lead group decision-making processes.
- Build a skills-based board: What is important for a board is that it has a good understanding of what skills it has and those skills it requires. Where possible, a board should seek to ensure that its members represent an appropriate balance between members with experience and knowledge of the organization and members with specialist expertise or fresh perspective. Board Members should also be considered on the additional qualities they possess, their “behavioral competencies”, as these qualities will influence the relationships around the boardroom table, between the board and management, and between directors and key stakeholders.
- Evaluate board and director performance and pursue opportunities for improvement: Boards must be aware of their own strengths and weaknesses, if they are to govern effectively. Board effectiveness can only be gauged if the board regularly assesses its own performance and that of individual members. Improvements to come from a board and director evaluation can include areas as diverse as board processes, director skills, competencies and motivation, or even boardroom relationships. It is critical that any agreed actions that come out of an evaluation are implemented and monitored. Boards should consider addressing weaknesses uncovered in board evaluations through director development programs and enhancing their governance processes.