It’s no secret that being a part of a board of directors equals traversing distinct and unprecedented challenges, responsibilities, and situations.
Knowing in advance what these adversities could potentially be and, thus, having the essential qualities in preparation for these challenges, is the key to discovering the solutions to overcoming issues in corporate governance.
Preparedness Equals Solutions – Overcoming Problematic Corporate Governance Issues
Corporate governance is a corporation’s organizational methods, structure, and guidelines which the board members dictate, implement and also follow.
To balance all of the moving parts between the stakeholders, management, and even governmental agencies, the community, and beyond, there are essential principles that the board must adhere to.
Because executive committees comprise every arena of management to guide the board on corporate governance issues, becoming familiar with problems companies are facing today is fundamental.
Common Challenges Board Directors Encounter
There is no cookie-cutter guide to directing the challenges board members will confront, but there are five common ones that are important to know how to overcome.
Since corporate governance provides the framework for attaining a company’s objectives, it is important to have a competent board of diverse members who prioritize risk management and ensure timely communication.
However, the members of the board who work in these corporations have to understand common governance pain points and how to overcome them.
Business Communication
The process of disseminating information between both employees and those outside of the company can be quite challenging.
Knowing how to guide a company’s communication method is a key component of being a successful board member.
Leadership from board members should ensure that the company can communicate both well and with consistency.
It is important to be direct and clear and address those specifically to which the information pertains.
Always ensure clear expectations, while also being able to communicate accomplishments, as well as clarification points through all tiers of personnel within the company.
Balancing Risk and Opportunity
The best way to mitigate risk is to have an understanding of what the risks are before they occur.
Proper management of these risks is a key component of corporate governance.
Knowing the risks is only half the battle. When the risks are identified, the opportunities can therefore be identified as well.
Being perceptive when it comes to the corporation’s operations, strategies, and finances will benefit the board with guidance when it comes to balancing risk and opportunity.
Following Board Duties
The most advantageous way to assure board duties are being followed is to have a clear understanding of what the duties encompass.
These duties can vary depending on whether the corporation is a for-profit or non-profit entity.
For-profit board members can have a critical impact when it comes to profits. So ensuring duties are performed is paramount.
Non-profit boards have the additional task of considering the organization’s bylaws and ways to fulfill their mission through the utilization of the donor network.
Managing Board-CEO Communication
Hiring and evaluating the chief executives of a corporation is a lofty responsibility and one that board members should not take lightly.
Being able to support and communicate with the CEO and knowing when and how to provide light oversight versus giving deeper guidance when it comes to stakeholders is a delicate task.
Shareholder Activism
Shareholder activism is the result of an individual using their equity in a company to put pressure on the corporation to make a change.
This is inevitable and members of the board need to know how to handle these situations when they arise.
Being aware of the risk factors when it comes to dealing with passionate, yet potentially hostile individuals, can prove to be a real challenge.
The key is to rely on communication and people skills while also being able to fall back on your own judgment and knowledge of the company when handling shareholder activism.
Diversity Attains Corporate Objectives
Because corporate governance is the system that guides the conduct of the people within an organization, as well as the organization itself, it is important to have a board of directors aimed at diversifying all aspects of the business.
This is the most complete way to ensure corporate objectives are met while also accomplishing overcoming the potentially demanding corporate governance issues.