The management principles of the board define how a board runs its business. They regulate the relationship between a company’s Board of Directors and how it supervises corporate matters that cannot be delegated by lower-ranking officials.
The board is responsible for many aspects that can’t be included in the annual report of a business. The board, for example, must hire and recruit a CEO, make sure that the company is operating in the best interests of its shareholders, and communicate any issues of concern to shareholders. The board also has an obligation to evaluate the potential and capabilities of the company.
Many boards conduct annual reviews to improve their performance. These may be focused on the board as an entire, the board’s committees, directors’ individual directors, or the chair.
Another common practice is to keep a record of every meeting. This allows the board to comprehend how its decisions impact others including employees and investors. A well-written document can be a valuable piece of evidence in legal instances.
The board must also be able to identify and evaluate risk. This involves identifying the company’s weaknesses and developing plans to avoid or reduce them. This also includes assessing the effect of any changes on stakeholders, like communities. The board must be informed of any major developments as soon as is possible. The board, for example should be aware of instances when CEO compensation is higher than the company’s performance as well as the average worker salaries.