It can seem like a heavy burden to comply with the recommendations/code, and is sometimes seen as a “tick the box” exercise. A few boards even try to handle compliance assessment in one meeting, as if that will clearly show how well the company meets the recommendations.
Our experience is that instead of seeing corporate governance as a burden, the most effective boards recognize its importance in securing the company’s long-term sustainable success, and dedicate time and resources to continuously improve their processes accordingly.
Transparency is critical for investors and other stakeholders. They want to be involved in dialogue with the company and know what is working, where the risks are, and the plans for mitigating the risks. Investors and other stakeholders are more comfortable with the company if they see a company culture with strong, effective corporate governance and the integrity to be open about its aim for continuous improvement.
Additionally, when board members spend time reading and discussing the corporate governance guidelines, the results usually lead to clearer, better, and more aligned processes. Moreover, what might have seemed difficult questions for board members to ask become less so.
Boards should remember that the guidelines are usually based on a “comply or explain” approach. This means that companies cannot follow the code/recommendations exactly with each part of the guideline, but instead explain WHY they have decided to do something different, and which approach they have chosen instead. By providing a thorough, reasonable explanation, the board and the company will create transparency and trust, and still comply.
Therefore, be sure your board is dedicating enough time to the annual wheel of board agenda topics to address good corporate governance and avoid the temptation to view it as an unnecessary workload. In doing this, your board will strengthen its ability to safeguard and improve the company's long-term value.
If you are interested in exploring this topic further, feel free to reach out to us at reception@LeadershipAdvisorGroup.com
Interested in self-evaluation? Try Online Board Evaluations
Well-aligned with national corporate and foundation/charity governance codes, our board clients usually conduct an external board evaluation every three years. However, most national governance codes recommend that boards perform a self-evaluation in the years between external board evaluations. Therefore, we have developed OnlineBoardEvaluations.com, a tool enabling boards to self-evaluate effectively and effortlessly every year.
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