Governance Process Flow: Steps to Succeed

In any organization, there are several critical business processes and governance process flow, the continuity of which determines the success of the company.

The Importance of Governance Process Flow in Decision-Making Process

The decision-making process of the boards is influenced by the behavioral characteristics of individual directors. Accordingly, we have developed a typology of directors based on their behavior. Naturally, directors with certain behaviors are typical of ideal, “functional councils,” such as the chairman-conductor, change agent, peacemaker, mentor, and debater. Other types of directors are found on “non-functional boards,” and we include the chairperson-trustee, controller, conformist, support group, and critic.

In order to properly arrange the structure, and to see the formats of the necessary regular meetings, it is of great importance to understand the main business processes currently in the organization. It is precisely how we correctly distribute roles and responsibilities that determines the structure that exists under the direct subordination of the head. In the course of developing a structure, we are interested in processes at the macro level, what large steps, functions they consist of, and not at the level of detailed steps.

However, since the financial results of a governance process flow are influenced by many external factors, neither effective nor ineffective management can be considered a necessary or sufficient condition for obtaining positive or negative results. In fact, most research on corporate governance has not found a causal relationship between the structure and form of the board and the financial success of a company. This also applies to this work, and we did not strive for such a thing. However, common sense dictates that these phenomena are interrelated, and this book provides ample evidence that studying the processes occurring in the board of directors can lead to the discovery of such a relationship.

5 Steps to Succeed in the Board of Directors Decision Making Process

What steps can help you to be successful at launching the board of directors decision making process:

  1. Bring all participants to a common understanding of knowledge management. For example, understanding it as a process with all the necessary tools and attributes.
  2. More emphasis on the use of knowledge than on its accumulation, storage, and management.
  3. Think of the launch of knowledge management as a change in the way people work and behave. Do not place your hopes solely on management technologies, even if they are advanced – experience has shown many times that people in such a project are immeasurably more important.
  4. Don’t neglect/follow through on all the organizational change steps that will inevitably need to be done.
  5. Pay due attention to the complexities of data collection. The reason, again, is in people – they speak less than they know, remember only what is needed in their activities, and cannot remember something at your command.

The governance process flow should exercise control over the corporate governance practice, which involves the analysis on a regular basis of the compliance of the corporate governance system in the company with the goals and objectives of the company, as well as the scale of its activities and the risks assumed. Based on the results of the assessment, the Board of Directors is recommended to formulate proposals aimed at improving corporate governance practices and, if necessary, introducing appropriate amendments to the charter and internal documents of the company. People become shareholders in the expectation that the value of their shares will grow, that they will be able to earn.

Duty of Confidentiality Board of Directors – Things to Remember

According to the categories of access, all information is divided into open (public) and information limited in access. Check the importance of the duty of confidentiality board of directors below.

What Is Regarded to Confidentiality Board of Directors?

Confidential information includes that information, access to which is limited by federal laws. The objectives of the restrictions are different. For example, protection of the foundations of the constitutional order, morality, health, rights, and legitimate interests of certain persons, ensuring the country’s defense and state security. Confidentiality means that a person who has access to certain information has no right to transfer such information to other persons without the consent of its owner.

The most surprising thing is that the duty of a confidentiality board of directors is taken under the condition of a lack of understanding of the relationship of corporate governance with the efficiency of companies and an understanding of how the boards of directors actually work. Paradoxically, against the backdrop of increased regulation and coverage of the management of private companies, our knowledge in this area has increased only marginally. This is explained by the fact that it is very difficult to study boards of directors. Of all the significant institutions of society, they are perhaps the most closed. Their meetings rarely, if ever, take place in front of open doors, and outsiders are rarely invited to attend.

It should be noted that the regulation on the board of directors’ confidentiality, the regulation on the sole executive body, as well as other documents of the joint-stock company (regulation on the dividend policy or information policy) are not mandatory due to legal requirements. Society at its own discretion decides whether to accept these documents or not. In any case, their content should not contradict the provisions of the charter of the joint-stock company and the requirements of the law.

Are Board Papers Confidential?

Most of the work devoted to boards of directors, and there has been a whole library of those in recent years, is limited to the analysis of information that is in the public domain – annual reports, documents submitted to regulatory bodies, and corporate press releases. As a result, these papers cover main issues related to the structure and composition of the board of directors: the combination of the positions of the chairman of the board and the general director, the proportion of independent directors, the number of the board, the structure of the committees and the degree of their independence.

The main objectives of creating regulatory confidentiality are:

  • Reducing regulatory uncertainty and mitigating the risks of violation of the legislation.
  • Elaboration and formation of a legal framework for new technologies.
  • Reduced time to market for new solutions.
  • Increasing the investment attractiveness of companies.
  • Possibility of early detection and filtering out of non-working models.
  • Retaining control by the regulator.
  • The Board of Directors exercises control over the disclosure of information by the company, as well as over the provision of information to shareholders.
  • The board of directors approves the information policy of the company, which should provide for the observance of a reasonable balance between the openness of the company and the observance of its commercial interests.
  • Current control over compliance with the requirements of the legislation regarding the disclosure of information on the company’s activities.

The success and long-term functioning of the business depend on how the rights and obligations of all participants in the activities of the joint-stock company (shareholders, board of directors, executive bodies) are secured.

What Is Board Governance?

Determination of principles and approaches to organizing the risk management and internal control system in the company, ensuring the objectivity of the company’s financial reporting, including external audit are the main characteristics of board governance.

Role and Functions of the Board Governance

An effective Board Governance is a key link in an effective corporate governance system. The efficiency of the company depends on what tasks the Council sets before the management, what questions it asks during the meetings, how carefully it checks and analyzes the information received from the management.  But what is board governance?

Board governance is a concept that encompasses the system of relationships between the executive bodies of a JSC, its board of directors, shareholders, and other interested parties. Corporate governance is the basis for defining the goals of the company, achievement of these goals, and mechanisms of control over its activities by shareholders and other interested parties.

Retention is an integral part of an organization’s board governance strategy because, without it, sorting and analysis are impossible. Access to reliable, real-time data is essential to improve workflows, security, and resource management, so the demand for advanced data management and analytics solutions continues to grow. This activity can be carried out through a specially created committee of the board of directors on strategy, since this, as a rule, contributes to a better elaboration of these issues.

The main functions of board governance are:

  • control over the implementation of the strategy;
  • control over the executive body;
  • provision of internal control;
  • creation of a risk management and monitoring system;
  • ensuring an effective disclosure system;
  • establishes the main guidelines for the company’s activities for the long term, approves key performance indicators, the main business goals of the company, strategies, and business plans, and controls their implementation;
  • annually approves the financial and economic plan (budget) of the company on the proposal of the executive bodies;
  • in some cases – determines the development strategy and evaluates the performance of controlled companies.

How Do Boards of Directors Work?

To understand how boards of directors work, it is recommended to check the information below. De facto, a board of directors is a group of people that:

  • meets regularly to assess the results and strategic development of the company;
  • consists of at least owners and at least one independent director;
  • able to isolate herself from the daily routine and take a broader view of the business;
  • discusses really difficult issues and makes strategic decisions regarding the future of the company;
  • and most importantly, he manages the company.

Besides, the board of directors and corporate governance also solves the owner’s own problems – it helps him to minimize his presence in operational management. The board governance should facilitate the settlement of corporate conflicts, and all shareholders should be given the opportunity to receive effective protection in the event of a violation of their rights. The board of directors should play a key role in taking measures to prevent and resolve conflicts between the body of the company and its shareholder, as well as between shareholders, if such a conflict affects the interests of the community, use out-of-court dispute resolution procedures, including mediation.

A special role in the prevention of corporate conflicts should be played by independent directors of the company, who must first assess the actions and decisions of the company that may lead to a corporate conflict, and in the event of a negative conclusion of which the corresponding actions (decisions) are not recommended to be taken (taken).