Best Practices for Good Governance
Most Boards accept and practice basic conventions of board governance, such as establishing a Board charter, following accepted policies, and keeping accurate minutes. The National Association of Corporate Directors (NACD) makes several more recommendations for effective leadership:
- Establish a Governance or Nominating Committee. This committee should is responsible for appointing members to the board and evaluating its effectiveness.
- Create independent leadership roles. While many organizations still allow their Chief Executive Officer (CEO) to act as Chairperson, the NACD recommends appointing an independent Chairperson. This promotes unbiased decision-making and a balance of power. Other leadership positions could also be established, such as a Co-chair, Treasurers, etc. to further balance power and build the capacity of the board’s members.
- Encourage members to help set meeting agendas. Input from all members of the board is imperative, but often important topics are never introduced. It’s important for members to be active in setting the agenda, so the topics they feel are important are given due consideration.
- Establish a three-tier evaluation process. In The Modern Board of Directors, we explain how a board’s responsibilities include evaluation of senior managers as well as the board’s own effectiveness. The NACD suggests adding a third layer – an evaluation process for individual directors. This will help ensure every member of the board is contributing equally.
- Access outside advice. Many boards decide to secure the services of an external party to build capacity or help solve a problem. Navigating this process can be tricky, but it is easier when both the independent directors and senior management feel involved in the selection process. It is not only managers that can benefit from consulting or other services– the Board itself may need guidance. Though it’s natural to feel defensive, board members need not see getting advice as a sign of weakness. In fact, it’s an opportunity for the entire organization to grow even stronger.
- Link board member compensation to the organization’s success. In some boards, members receive a form of compensation for their service: a stipend, health benefits, or stock options. The NACD suggests that stock options are most effective because they tie the Director’s compensation to the organization’s success.1
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