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).