The traditional role of the board of directors in a public company – to oversee and control – is hopelessly outdated. Directors will have to delve into the smallest details of how companies operate.
What Should You Distinguish in Board Director Relationship Management?
We all live in a new reality. Changes are happening very quickly, new technologies are emerging, the level of uncertainty is increasing every day. Planning horizons are shrinking, strategies written for 20 years ahead are losing their relevance. The methods of competition that existed before cease to work. What made companies successful in the past no longer guarantees them success in the future.
An effective Board of Directors is a key link in an effective corporate governance system. The effectiveness of the company depends on what tasks the Board sets for the management, what questions it asks during meetings, how carefully it checks and analyzes the information received from the management.
The board director relationship management:
- establishes the main guidelines for the company’s activities in the long term, approves key performance indicators, the main business goals of the company, strategies, and business plans, and controls their implementation.
- annually approves the financial and economic plan (budget) of the company upon the recommendation of the executive bodies.
- in some cases – determines the development strategy and evaluates the performance of controlled companies.
Tasks of the Modern Board of Directors and the Relationship Management
Board director relationship management has become globalized. The internal documents of companies in different countries, describing the functions of the governing bodies and the legal norms governing their activities, are increasingly being unified. However, with external similarities, the content of the work of the management bodies of companies in different countries often differs greatly.
The traditional role of the board of directors in a public company is to oversee and control. This is prescribed in the requirements for entering the stock exchange and the corporate governance code. But the world has become more complex, and one oversight function is no longer enough. We need two more: to be an additional source of expertise and a constructive opponent for management. In this regard, the most effective board of directors should include people not only with different competencies but also with different types. Those who like to be mentors will become good advisers, while visionaries who can predict trends will become opponents.
The Main Goals of the Board Director Relationship Management
Board director relationship management’s goals are:
- Introduction and application of the principles of good corporate governance.
- Facilitating the process of decision-making by the Board of Directors on the short-term and long-term development of the company.
- Facilitating communication and increasing the level of information security of the company’s shareholders, financial media, and analyzers.
- Improving processes related to information disclosure.
- Increasing the confidence of shareholders, investors, and all persons interested in the management of the company and its development.
- Promoting and respecting high ethical principles in order to approach world standards of good corporate governance.
The tasks of the modern board of directors are formulated much more broadly than in previous years. Shareholders, investors, and stakeholders expect the board of directors to create added value for the company and ensure its long-term sustainable development. Such expectations, in turn, are a big challenge for the boards themselves, forcing them to think about their own performance and ways to improve it.