Corporate governance is more than just a buzzword—it’s the blueprint that guides how a company is run, with the board of directors at the steering wheel. The road to long-term success is full of challenges; fierce competition, new risks, and pressure on costs and profits that all demand strategic governance. Layer on the human dynamics that emerge within a board, and good corporate governance gets even more complex.
As difficult as corporate governance can be, it’s critical to ensure companies stay profitable, operate ethically, and manage risk. Below is an overview of our top 10 best governance practices, along with strategies for implementing them effectively. But first, it’s worth noting that governance doesn’t just affect your organization – it’s also important to your investors.
Why corporate governance best practices improve investor confidence
Strong corporate governance is more than just a regulatory requirement—it’s a cornerstone of organizational success. Good governance improves investor confidence, since it builds trust that companies will protect shareholder interests and create healthy returns.
A well-structured governance framework can improve decision-making, risk management, and performance. Companies with good governance are less likely to make costly errors that overlook regulatory standards, and more likely to make decisions that balance shareholder and other stakeholder needs for long-term sustainability.
Although many organizations understand why good governance matters, it can be a challenge to put into practice. Starting with a few key best practices is an effective way to improve governance across the board and build a foundation for long-term success.
Top 10 corporate governance best practices
Aprio was founded in 2003 with the aim of supporting good governance for all organizations, large and small with our board technology. Since then, we’ve had the opportunity to work with thousands of board members and corporate secretaries and observe patterns in ensuring good corporate governance practices. Here is our list of top 10 observations.
1. Recognize that good corporate governance is about balancing compliance with strategic oversight
Regulatory compliance is fundamental to a board’s responsibilities, but the most effective boards balance compliance with strategic oversight.
Achieving this balance starts with differentiating the board’s roles and responsibilities from those of the management team. The board is primarily responsible for strategic oversight. They need to consider the regulatory implications of corporate strategy, ensure there are no conflicts of interest, and develop internal controls to keep its own operations compliant.
Management is responsible for executing the strategy set by the board, including building compliance into day-to-day company operations. The division of corporate governance responsibilities can vary from board to board, but a clear definition of accountability will go a long way to building an effective and productive relationship with executives and senior managers.
2. Clarify the board’s role in strategy and risk management
Risk is a critical component of corporate governance. Risk” incorporates all potential risks to the company – e.g. financial risks, cybersecurity, legal and regulatory policy changes, human, social and environmental responsibilities, competitor response, global economic conditions, and more. Every board should develop a robust system to manage risks, ensuring it goes beyond the traditional focus of the audit report and audit committee.
While management typically champions defining, quantifying and monitoring risk, the board is accountable for managing it. Boards highly attuned to risk can make better decisions because they develop a deeper, more accurate understanding of the cost-benefit or risk-rewards tradeoffs involved.
Given its responsibility for the company’s long-term performance, the board should manage risks with an eye toward the future. Changes in the market, regulatory environment, technology, and global conditions can all have a significant impact on the organization’s risk landscape. A proactive approach includes regularly reviewing and updating risk frameworks to identify emerging threats and opportunities.
3. Monitor corporate performance
Tracking corporate performance is essential for strategic corporate governance, as it enables the board to spot patterns, anticipate challenges, and make data-driven decisions. To achieve this, the board must identify the company’s key performance indicators (KPIs) that can serve as the foundation for evaluating success or failure.
The board should then establish a clear and consistent reporting framework. This includes defining what should be reported, how often, and in what format to ensure that the board has timely, actionable, and complete information.
Board portal software can support performance monitoring by securely storing board reports in one centralized place. Directors can easily search archives of board agendas or motions, and performance data over time to analyze trends and track the success of key initiatives.
4. Build a skills-based, diverse board
Research shows that the composition of a corporate board significantly impacts its board’s culture and engagement. While there’s a growing emphasis on diversity, the benefits extend beyond mere representation of different genders, ages or ethnic backgrounds. Boards should also encompass a wide range of professional backgrounds and skill sets to increase the diversity of perspectives they represent.
While directors are required to have basic finance and accounting competencies to sit on a board and carry out their fiduciary duties, it’s critical to assess what other core skills are valuable. Board members who can manage conflict, listen effectively, solve complex problems, and communicate diplomatically create stronger relationships around the board table – both with directors and management.
Skill set inventories and assessments can help identify the strengths each board member brings to the table and highlight where gaps exist. This can guide recruitment efforts toward building a more diverse, well-rounded board capable of achieving a deeper understanding of the challenges and opportunities facing the organization.
See related: What board diversity means for modern governance & why it’s important
5. Appoint an effective, competent chairperson
The board chairperson plays one of the most critical roles on any board, as they establish the board culture and trust required to ensure good corporate governance. As the “leader” of the board, the chairperson should demonstrate strong leadership skills, sharp business acumen, and solid professional ethics.
The chair should have the technical skills to conduct meetings effectively, lead the board through the decision-making process and oversee other core board activities, such as recruitment, succession planning, orientation, and board evaluation.
They also need to balance a strong working relationship with the CEO with maintaining the board’s independence. This includes keeping directors focused on the company’s mission, ensuring the board understands its responsibilities, and maintaining appropriate boundaries with staff.
While people in the board chair role are often former CEOs, it’s crucial for the chairperson to avoid overstepping into operational or managerial responsibilities to maintain clear lines of accountability. An effective chairperson understands their distinct role in protecting shareholder and other stakeholder interests while allowing the CEO to execute company strategy.
6. Support equal voices for all board members
Giving directors an equal voice is critical to keeping them engaged and maintaining a sense of belonging on the board. Many times, board meetings favor the director who is the loudest talker, which limits the perspectives needed for making sound decisions.
Boards that allow the most outspoken members to dominate discussions will limit the diversity of perspectives needed for making sound decisions.
The board chairperson plays an important role in drawing in the perspectives of all directors – ensuring all members are heard before decisions are finalized or one director is permitted to take the floor a second time. By carefully monitoring body language for signs of boredom, irritation or discontent, the chair can intervene quickly.
Fostering inclusive discussions builds trust and rapport, since board members can rest assured that their perspective will be given equal consideration. Additional strategies can include ensuring all members have equal access to information at the same time, and providing opportunities to collaborate before board meetings.
Technology like board management software can help embed equality into decision-making processes. Board portal technology ensures that every member has the same access to information, no matter their relationship with executives or the chair. They can also vote, annotate documents, view progress on issues, and raise their concerns online – creating fair processes that include more introverted communication styles.
7. Build and maintain a strong corporate governance infrastructure
Corporate governance infrastructure includes both the policies that define how boards are run and the processes that set them in motion. Clear policies and codes of conduct help guide organizational behaviour, shape actions and decisions, and create clear lines of accountability between boards and management.
However, even well-defined policies can falter without efficient internal processes. Disorganized procedures can lead to poor access to information, weak communication, and uninformed decision making, leaving directors frustrated and compromising board performance.
Many modern boards are turning to board meeting software to align board meeting processes with corporate policies. With board software, all board members get secure, round-the-clock access to corporate policies and instant notifications on any updates. Board software can also help create standard practices that put policies into action, driving the success and integrity of the board’s governance infrastructure.
8. Ensure the directors have the information they need, when they need it
Access to the right information at the right time is not just a benefit—it’s a necessity for effective decision-making on corporate boards. Ideally, board briefings should be clear, relevant, timely and complete. They should present all of the available options, with a balanced view of their advantages and disadvantages. Then, they should provide a recommendation based on the context of the company’s values, available resources, and shareholder and other stakeholder interests.
However, the timing of this information is also critical. Research on board engagement also shows that efficient board communication is a major influencer on board engagement and the effectiveness of board meetings. All members should have access to board briefings in time to consider all the options and make informed recommendations.
When preparing information for the board, it’s essential to ensure that it meets these criteria:
- Is it clear and easy to understand?
- Is it timely enough to be actionable?
- Is it succinct and free of unnecessary detail?
- Is it comprehensive, covering all relevant aspects of the issue?
- Is it specific to the context of the organization’s goals and challenges?
These qualities define the information that enables directors to make well-informed decisions.
See related: How does a board of directors portal impact board governance?
9. Encourage a culture of collaboration and accountability
Board collaboration and accountability are the hallmarks of productive meetings. Without them, meetings risk becoming mere informational briefings that don’t contribute to real progress. To address this, it’s important to cultivate a culture where collaboration and preparation are the norm.
Directors should be encouraged to engage in discussions between meetings and arrive well-prepared to contribute meaningfully. Board portal software can support this by letting directors review and annotate materials in advance. It also enables administrators to track which directors have reviewed the materials, keeping board members accountable for meeting prep.
Clear meeting agendas are also key to effective collaboration. Agendas help ensure meetings are spent well by budgeting time for the most pressing action items, and saving time for questions, discussion, and decisions. Board portal software can make agendas more efficient, with relevant information attached to each item. When meeting time is well-spent, it can help directors stay engaged with a strong sense of direction and purpose.
10. Routinely evaluate the board’s performance
Finally, boards need to be aware of their own strengths and weaknesses in order to govern effectively and encourage high standards of performance. Each director should be held to clear performance expectations and measure their own contribution annually at minimum.
Some boards also routinely evaluate the composition and performance of the board as a whole. This can help ensure the combined skills of the board continues to meet the needs of the organization and support company operations as it evolves.
Board portal software can support CEO or board performance assessments through confidential surveys where data is easily collected and summarized for interpretation. Since all information is archived, members can also use it to access a macro assessment of board performance over time.
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Trends in corporate governance best practices to watch
The National Association of Corporate Directors found that shifting economic conditions, regulatory requirements, and cybersecurity threats were the top three concerns for directors this year. Improvements in strategy execution and candid conversations were two of the top areas of focus for boards.
Companies under pressure to innovate faster are poised to make significant technology investments, but risk management is a significant concern. Pressure to innovate faster and adjust to fluctuating economic conditions also makes it more difficult to stick to more traditional, long-term plans.
A few best practices to watch in this environment are:
- An increased focus on agility and continuous strategic planning
- More domain-specific knowledge on boards that balance leadership skills with deep expertise
- Setting higher standards for board meetings to tackle critical issues
As boards move to adopt new best practices, leveraging the right tools will be critical to success. Board portal software can help enable these improvements, ensuring that directors have the resources they need to stay on top of best practices as their needs evolve.
Ensure good corporate governance with a board portal
Board portal software is purpose-built for ensuring good corporate governance. It makes board policies, strategic plans, risk guidance, and other core governance documents easy to access – and offers established workflows designed to uphold best practices.
The right board portal software helps a board maintain good corporate governance by making board policies, company strategic plans, risk guidance, and other core governance documents easy to search and access securely, plus making it easier to prepare for board meetings and engage everyone in board decisions.
Aprio board portal software makes it efficient to ensure good corporate governance with:
- User-friendly software for core board processes, including document storage, meetings, voting, surveys, and more
- Quick access to all board information, including board packs, agendas, and policies
- A convenient way for board members to review board materials, ask questions, and annotate documents – on any device
- Training and onboarding support for new directors, who can review archives to get up to speed faster
- Survey tools to support board performance and CEO evaluations
- Automated audit trails with meeting minutes, motions, and reports at your fingertips
- A clear view of board activities and decisions with essential board reports
See related: 5 benefits of corporate governance software
See Aprio’s board portal for strong governance in action
Ready to learn more about how Aprio board portal software can help you ensure strong corporate governance? Whether you’re looking for a new solution, or a step up from manual processes, assess the fit with Aprio.
Get in touch with us. We’d love to learn more about your business and how we can help support your corporate governance goals.
