The Board Management Principles are a set of best practices to help the board to fulfill its mission. These principles include the use annual assessments to evaluate the performance of an organization, the appointment of an independent chair, and the inclusion of non-management directors in CEO evaluations. They also use of executive sessions to discuss sensitive issues, like conflicts of interest.
A board has a duty to act in the best interest of the company, and its shareholders over the long-term. Consequently, while a board should take into consideration the opinions of shareholders, its duty is to use its own judgment independently. The board should also assess the potential short- and long-term risks to the company’s ability to create value and consider them when making decisions and strategies for the company.
There is no universal model of board structure and composition. Boards should be willing to test different models, and consider 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 result in boards that are too secluded and are unable to address the risks and challenges facing a business. Boards should be aware that the growing emphasis placed on governance, environmental and social (ESG) concerns of investors demands them to be more flexible than in the past.
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