Board Management Principles

Data Security

The principles of board management are a set of best practices that help the board achieve its governing mission. They include the use of annual evaluations to assess the performance of a board, appointment of an independent chair and the inclusion of nonmanagement directors in CEO evaluations, as well as the use of executive sessions to discuss sensitive issues such as conflicts of interests.

A board’s responsibility is to act in what it believes is the long-term best interests of the company and its shareholders. Consequently, while a board should consider the views of shareholders, its obligation is to exercise its own judgment independently. A board should also carefully assess the potential risks that could impact a company’s ability to create value in the short and long run and take into account these factors when evaluating the effectiveness of corporate decisions and strategies.

Therefore, there’s no universal model for a board’s structure and composition. Instead, boards should be open to playing with various models and think about how each could impact the board’s 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 result in boards that are too isolated and unable to tackle the challenges and risks facing a business. Boards must be aware of the growing emphasis placed on governance, environmental and social (ESG) concerns of investors demands them to be more flexible than in the past.