Board Management Principles

The principles of management for boards are a collection of best practices that can help a board achieve its governing mission. These principles include the use annual assessments to analyze the performance of an organization, the appointment of an independent chair, and the inclusion non-management directors in CEO evaluations. They also use executive sessions to discuss sensitive issues such as conflict of interest.

A board is accountable to act in the best interest of the company, and its shareholders in the long-term. Thus, while a company’s board must take into account the views of shareholders, their responsibility is to use its own judgment independently. The board should also assess the potential risks that could affect the company’s ability to create value in the short and long-term, and weigh these factors when making decisions and strategies for the company.

There isn’t a single universal model of board structure and composition. Boards should be prepared to experiment with different models, and think about what they could do to improve their overall effectiveness.

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 lead to boards that are too insular and unable to effectively address the challenges and risks facing the company. Boards should be aware that the growing focus on environmental, social and governance (ESG) concerns of investors requires them to be more flexible than in the past.

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