Wednesday, February 11, 2015

What’s The #1 Pick of the Board Function

Governance is like a steering wheel, comprises six elements: culture, values, leadership, resource allocation, strategy, and controls.
Business management and governance are interdependent disciplines to keep businesses move towards the right direction with the proper speed. Governance is like a steering wheel, comprises six elements: culture, values, leadership, resource allocation, strategy, and controls. The first two are intangible but are reflected in the choice of leadership, approval of how resources are allocated, approval of what strategies are pursued to convert those resources into stakeholder value, and controls that foster conformance with culture, values, allocation of resources and strategy. The board as one of the most significant governance bodies, if you had to choose one and only one function of a corporate board of directors, what is the single most important function/role?

Strategy oversight: The most important function of any board is the oversight of a holistic company strategy & execution through focused leadership; monitor its implementation and results, amend wherever necessary to match changing marketplace conditions; and by doing so to ensure the long-term financial stability of the company while improving shareholder wealth. Also, oversee the management of risks to the reputation, viability, and profitability of the enterprise.

Ensure integrity in the management of the organization. It means keeping the organization intact by ensuring sustainability. That would require picking the right senior executive team, ensuring effective governance and partnering with CXOs to take the company forward while assessing long-term risks as part of the overall strategy process. The most important function of 'an independent director' is to ensure integrity-ensure uninhibited checks and controls over the functioning and decision making of the 'collective Board.' Integrity encompasses accountability. A person of high integrity will also have good ethical conduct. Integrity causes management to leverage information that is required for decision making by the board and shareholders. Integrity causes management to be responsible and accountable.

Establish sound corporate governance structure framework that will steer up strategic goal setting and strong internal controls. The important board activities include deliberation, moving the enterprise forward, ensuring the organization makes sense, etc. These are strategies associated with the execution of the governance. It is to define the best possible working equilibrium between the often conflicting forces and drivers, both external and internal, whether imposed or adopted, acting on the organization’s vision and strategy. So the governance is an organization's ability to manage its responsibilities for environmental stewardship, social well-being, and economic prosperity over the long term transparently; while being held accountable to its stakeholders from the defined value holds through its impact capital results. The effective governance discipline can well balance a value-based equation, supported by a solid framework of governance structure and cultural values, through careful ROV calculations and evaluations.

It is hard to only pick one function, doing all above effectively are important for successful business governance; from strategy oversight to governance structure & framework; from leadership grooming to talent/culture development, the board provides an “outside-in” view of the business and multi-dimensional lenses to oversee and advise business strategy and execution and steer business toward the right direction.


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