With an increased emphasis on company governance, it has become vital to have a robust corporate governance infrastructure in place. This can include the appointment of directors who have the authority to act in the name of the company and carry out acts and operations consistent with the company's business objectives.
Making up your board
In order to have a balanced board it is recommended that it is composed of different types of directors:
- Executive – implementing the strategy decided upon by the board and the daily management of the company's operation.
- Non-executive – without executive responsibilities and expected to bring a wide range of skills and experience.
- Independent – expected to bring an independent view to the deliberations of the board.
Top tips when appointing a director
- It is important to be aware of duties and responsibilities under different local laws to ensure, as a director, you are acting reasonably, with diligence, in the best interests of the company.
- Diverse boards are effective boards - having multiple views on the possible outcomes of any action makes for a decision-making process that is more likely to take into account the various risks, consequences and implications of possible actions.
- Make sure to keep in mind key statutory duties.
- Act in the best interest of the company, with independent judgment, reasonable care, skill and diligence.
- Avoid conflict of interest, keep confidential and act within your powers.
What makes strong corporate governance a necessity?
The quality and effectiveness of the decision-making process of the board of directors is increasingly a focal point for companies, as it has been demonstrated over the years that companies which adhere to high levels of corporate governance perform better in the long-term. This entails a board composed of members who are diligent, who contribute to board discussions, understand the risks and uncertainties associated with the company's business environment and mitigate such risks by constructively challenging the decisions made at board level.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.