The CommitteeManager Blog

Good Corporate Governance: Rules of Thumb

Corporate Governance is absolutely crucial to instil confidence in your organisation in the eyes of your stakeholders. The community that you work in, be it local or international will respond to your corporate governance decisions with a watchful eye and their assessment will affect how your organisation is treated.

Apart from having and following good corporate guidelines, in the world of corporate governance the difference between good and bad usually comes down to simple decision making.

If you are about to make or be part of one of those key decisions, ask yourself:

"Would I tell my family about the decision I am about to make?", or
"Would I like everyone I know to read about this in tomorrow's paper?"

If you answer no to either of the above then this should be a pretty good guide to the decision you are about to make.

Need some tips? Here are some of the most important rules of thumb:

  • A board member should never become the CEO or a senior executive of the organisation - even if this could be explained in some logical manner it just looks so bad. This basically means the board member is appointing themselves the CEO so is unlikely to have been impartial in decision making. Even if the board member has excluded themselves from the selection process most observers would say the rest of the board is also conflicted by their relationship with the aspiring board member
  • A CEO should not direct board membership - the CEO should never have a hand in deciding who is going to be their ultimate boss, decide their continuation in the role or the level of remuneration they receive.
  • A CEO should not also be the Chairperson of the Board - it is not good when a CEO controls the board and the organisation as this means they effectively have complete control. This structure is popular in family companies in the USA but is really not going to fly with your community based NGO.
  • A Board members "day job" should never receive any compensation from the organisation - this is a conflict of interest for both organisations and again the perception of poor governance outweighs the fact the transaction might have been completely above board.
  • CEOs or board members should not encourage friends or close acquaintances to join the Board - again, this might be seen as the CEO trying to "help with membership" but will most likely be seen as a blatant conflict of interest to most stakeholders.
  • Avoid board members or executives who have been in place for a long time - everything needs renewal and a refresh from time to time. Organisations change and new skills need to be brought in.
  • Work towards Board diversity - some people still believe that diversity is simply having men and women on the board! All board members need to be able to bring the appropriate skills and experience to the organisation but the board should always seek to be as diverse as possible. One good way to think about this is to see if your board reflects the diversity of your organisations customer base - if not, change!

Good corporate governance is facilitated by having good systems and processes and is delivered by the awareness and attitudes of the board and senior management.

Need a powerful system to facilitate your governance goals?

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Welcome to the CommitteeManager blog

We are a team committed to helping people work together efficiently and productively.

So much of our lives are spent working with teams and committees; meetings, group emails, conference calls and project planning sessions. But most teams struggle to get the best out of their members due to a lack of organisation and a lack of focus.

This blog has been set up to provide helpful, practical advice on getting the most out of your meetings and groups. We will be covering topics ranging from efficiency tips, new ideas you may want to explore, to long term strategic planning.

When we're not helping provide tips and tricks about efficiency, we build CommitteeManager, an online application that can revolutionise the management of your board, committee and project team obligations.

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