Governance and Board of Directors Templates
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. Good corporate governance creates a transparent set of rules and controls in which shareholders, directors and officers have aligned incentives.
Board of Directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a corporation or organization. A board of directors’ activities are determined by the powers, duties and responsibilities conferred on it by an authority outside itself. These matters are typically detailed in regulations or in the organization’s constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet. However, the constitution and bylaws rarely address a board’s powers when faced with a corporate turnaround, restructuring, or emergencies, where board members need to act as agents of change in addition to their traditional responsibilities.
Typical duties of boards of directors include:
- governing the organization by establishing broad policies and setting out strategic objectives;
- selecting, appointing, supporting and reviewing the performance of the chief executive (of which the titles vary from organization to organization; the chief executive may be titled Chief Executive Officer, President or Executive Director);
- terminating the chief executive;
- ensuring the availability of adequate financial resources;
- approving annual budgets;
- accounting to the stakeholders for the organization’s performance;
- setting the salaries, compensation and benefits of senior management;
In an organization with voting members, the board is accountable to, and might be subordinate to, the organization’s full membership, which usually vote for the members of the board. In a stock corporation, non-executive directors are voted for by the shareholders and the board is the highest authority in the management of the corporation. The board of directors appoints the chief executive officer of the corporation and sets out the overall strategic direction. In corporations with dispersed ownership, the identification and nomination of directors (that shareholders vote for or against) are often done by the board itself, leading to a high degree of self-perpetuation.
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