How to ensure good corporate governance

Corporate governance refers to the systems and processes that guide how a company is run, with the board of directors at the steering wheel. Understanding why corporate governance is important helps organizations build sustainable success through the challenges of fierce competition, emerging risks, and pressure on costs and profits. 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 practices are more than just a regulatory requirement—they’re a cornerstone of organizational success. Good governance improves investor confidence by demonstrating a company’s commitment to ethical behavior, transparent financial reporting, and protecting shareholder interests. Institutional investors in particular scrutinize governance structures closely, knowing that effective corporate governance directly impacts a company’s reputation and ability to create healthy returns.

Corporate governance frameworks that are well-structured can improve decision-making, risk management, and financial 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. Corporate governance involves clearly defining these boundaries. While the board provides strategic oversight guided by corporate governance principles, the company’s management team—including executive management—executes the strategy. Corporate governance focuses on this balance: the board sets direction, management implements it, and both work together within defined accountability structures.

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 board 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.

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.

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.

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. These pressures make adhering to fundamental principles of corporate governance increasingly critical for maintaining both strong financial performance and stakeholder trust. 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.

How technology supports corporate governance best practices

The right tools can make implementing these best practices much easier. 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.

Here’s how Aprio makes it efficient to ensure good corporate governance:

• 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

Frequently asked questions

What is good corporate governance?

Good corporate governance is the system of rules, practices, and oversight that keeps an organization accountable to its members, owners, and the public. The board sets strategy and policy, hires and evaluates the CEO, makes sure financial controls and compliance are in place, and oversees risk while management runs day-to-day operations. Most organizations build their approach on widely used frameworks such as the OECD Principles of Corporate Governance. Done well, it builds trust and gives investors and funders confidence that the organization is being run responsibly.

What are the hallmarks of a well-governed board?

Well-governed boards share a few common traits. They include independent directors who can challenge management, they define clear roles and use committees like audit and governance to do focused work, and they operate with transparency so decisions can be traced and explained. They also take risk oversight seriously rather than reacting after something goes wrong. When these pieces are missing, you tend to see the weak oversight that has driven the biggest governance failures.

What are the three fiduciary duties of a board member?

Board members owe three core fiduciary duties: care, loyalty, and obedience. The duty of care means showing up informed and making decisions with reasonable diligence. The duty of loyalty means putting the organization’s interests ahead of your own and managing conflicts of interest. The duty of obedience means staying true to the organization’s mission and following its governing documents and the law.

What is the difference between board oversight and management?

The simplest way to put it is that the board governs and management executes. The board sets direction, approves strategy and policy, watches the finances, and holds the CEO accountable for results. Management then carries out that strategy and runs the operation day to day. Trouble usually starts when the line blurs, either because the board drifts into running things or because it steps back so far that real oversight disappears.

What laws shape corporate governance in the US and Canada?

In the United States, governance is shaped mainly by state corporate law, with the Sarbanes-Oxley Act adding strict financial reporting and internal-control requirements for public companies. In Canada, organizations follow the Canada Business Corporations Act or their provincial statute, along with guidance from securities regulators, and there is no single law that mirrors Sarbanes-Oxley exactly. The principles overlap a great deal in practice. Both systems expect a board to oversee finances, manage risk, and act in the organization’s best interest.

How can a board improve its governance practices?

Start by making sure roles are clear, so every director and committee knows what they own and where their responsibility ends. Bring in independent voices, document decisions so they hold up to scrutiny, and treat risk as something to oversee on an ongoing basis rather than after a problem appears. Regular evaluation of the board and the CEO keeps standards from slipping. Small, consistent habits like these do more for governance than any single policy.