Corporate Governance - Part 2
Part one of this article can be found at Corporate Governance - Part 1
Directors need to:
Act in good faith in the best interests of the company, demonstrating accountability for their actions and accepting responsibility for their decisions.
Act fairly and impartially. Avoiding any bias, discrimination, caprice or self-interest. They should demonstrate respect for others, acting in a professional and courteous manner. This also includes avoiding any conflict of interest (more on conflict of interest below). This is particularly important where a board member serves on more than one board.
Information obtained or given should be used appropriately and applied to the proper purpose to which it relates and kept confidential.
The board member should apply his position appropriately. This means to not use the position as a director to seek an undue or unfair advantage for oneself, one's family members, 'mates' or associates. This includes ensuring that you decline gifts or favours that may be construed as a bribe or kickback and cast doubt on your application of independent judgement as a director of the company.
It is vitally important that a director has a good grasp and understanding of the financial reports of a company. This means acting in a financially responsible manner. Being able to read and understand financial reports, audit reports and other financial material that comes before the board is a prime activity of a company director.
A director has to have a good grasp of strategy and how it should be applied to the decisions of the board. Strategy should always be applied to the best interests of the relevant stakeholders, such as shareholders for example. The Board of Directors are there to direct the progress and expansion of the company through planning, deciding policy and direction.
A Board member must integrate smoothly with the board as a whole offering his or her thoughts while also allowing others on the board to voice theirs.
Exercising due care. Doing ones due diligence to gather all relevant information. Making all efforts to understand the financial, strategic and other make reasonable enquiries; understand the financial, strategic and other implications of decisions.
Being punctilious* with regard to honesty and the expected standard of behaviour including acting honestly, in good faith and with the best interests of the company. Integrity plays a big part in this.
Being compliant with the various acts and regulations as pertains to corporate governance and responsibility.
Any and all information that comes across the board or the director in his or her capacity as a board member should remain confidential and the board member is responsible for ensuring the security of information in their keeping. The only exception is information which one is legally obliged to provide to authorised bodies by law.
Conflict of interest
Conflict of interest is sufficiently important enough to warrant further discussion.
A board member has the responsibility to ensure there is no conflict of interest by him in his capacity as a board member. If any conflict of interest arises or becomes evident then it would need to be managed in accordance with the policy of the company. Such a conflict might be of a personal nature or interest (directly or indirectly - such as a spouse having an interest financial or otherwise that might be considered in conflict with one's role on a board) or from a duty one is performing with another organisation, such as a board role for example.
A conflict of interest can be real or potential or even just perceived. In all cases the board member has the duty to speak up whether the conflict is their own or that of another board member to ensure the conflict is identified and managed so as to not affect the performance of the board members duty. Staff should also be empowered and supported to speak up about any conflicts
Being a board member is a trusted responsibility and not to be taken lightly. It is also an extremely rewarding endeavour that gives great satisfaction as a leader in society.
Part 1 of Corporate Governance is available at here
Part 3 of Corporate Governance is available at here
*punc.til.i.ous (p ngk-t l - s)
1. Strictly attentive to minute details of form in action or conduct. See Synonyms at meticulous.
2. Precise; scrupulous.
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