The start of a new year is the ideal time for boards to review their accomplishments and establish priorities for the year ahead. To ensure sound governance and effective leadership, it is worth reflecting on areas for improvement to help set the tone for a year of greater efficiency and better results.
The following checklist presents 10 concrete actions that boards of directors can easily implement to meet these objectives.
1. Review the previous year's minutes
Reviewing board minutes from the prior year can be a simple and effective way of ensuring good governance. This process provides an opportunity to reassess decisions made, track progress and identify unresolved issues and action items that may have been overlooked.
2. Assess the relevance of your governing documents
Are your governing documents outdated? Are they still working effectively for your company’s needs? If you haven't looked at your articles and by-laws in some time, you may want to dig out that dusty minute book and assess whether your governing documents align with current legislation and your company's evolving needs.
3. Analyze your corporate structure
Do you have subsidiaries that operate in similar markets or have overlapping functions that lead to redundancy and lower profitability? Does your current structure maximize tax efficiencies? Have you created separate legal entities for high-risk ventures that could isolate parent companies and the rest of the corporate group from liability and financial risk? Evaluating the structure of your corporate group and taking a strategic approach to your organizational framework are important to ensure proper risk management, create operational efficiencies and enhance the resilience of your business.
4. Update annual conflict of interest declarations
Incorporating the conflict-of-interest declarations by board members into the yearly governance process promotes transparency, accountability and trust among stakeholders. It can also help mitigate legal and financial liability while ensuring the board’s effectiveness and ethics.
5. Carefully examine the composition and effectiveness of your board
A well-composed board makes it easier to solve problems and make better-informed decisions. A diversity of backgrounds, knowledge, and expertise—including in legal, financial, technological, sustainability, and industry-specific fields—provides boards with a broader perspective for oversight and strategic guidance on issues affecting today's companies. Furthermore, a multigenerational board can foster innovation and facilitate leadership transitions and knowledge transfer. As for the board’s effectiveness, this depends on the availability and commitment of its members. Assessing the time spent by each member to determine whether they can serve on the board effectively can lead to offering specific training courses or revisiting the board's composition.
6. Promote better training for board members
Consider scheduling workshops, customized programs, or expert-led sessions to enrich board members’ knowledge, develop their skills, and broaden their perspectives so that they can fulfill their roles successfully. You may wish to consider training on issues such as climate change and sustainability strategies, cybersecurity and data protection, compliance with privacy laws, corporate governance, and artificial intelligence governance and oversight.
7. Assess risks and review director liability insurance
Boards are well advised to evaluate potential risks affecting their business and review the terms and conditions of their D&O policy to determine whether its coverage aligns with such risks, legal developments, and evolving organizational needs. Mitigating the risk that board members will be held personally responsible for actions or decisions taken in their official capacity supports better governance by creating an environment in which directors can act confidently, put the company's interests first and solve problems more effectively.
8. Review and update corporate policies
Are your corporate policies compliant with applicable laws and regulations? Are they aligned with your strategic objectives and corporate values? Updating and improving your corporate policies should be a priority. Identify gaps in internal controls and processes, promote accountability and address emerging risks and evolving legislation.
9. Review the logistics of board meetings
Proper document management is essential. Does the board receive clear, relevant analytical summaries that allow directors to focus on the most important matters? Meeting agendas should be drawn up with truly strategic topics in mind so that these are given more time. Regular strategic meetings with management are also crucial, as they enable the board and management to align themselves with strategic objectives and provide an opportunity to monitor progress and evaluate performance on a timely basis. They are also an opportunity for the board to identify emerging risks and implement mitigation plans while fostering open communication and constructive relationships with management.
10. Develop or review your crisis management or business continuity plan
If nothing else, the COVID-19 pandemic taught us that disastrous events can happen quickly and have devastating effects on a company’s operations. Having a business continuity plan is essential to a company’s resilience. Identify the company’s critical functions and processes, conduct a risk assessment, determine roles and responsibilities, develop contingency and mitigation plans and, perhaps most importantly, ensure proper communication and training.