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Enhance Board Effectiveness: A Guide for General Counsel
Now more than ever, boards need timely information that is easy to digest and puts the company’s risks in perspective.
Rapid changes in the technological, political, and social fabric are challenging today’s General Counsel (GC) to guide their boards, executive teams, and departments through evolving expectations, heightened risks, and overall complexity. To address these challenges, GCs need to establish an effective systems to support their boards.
Download our expert curated board effectiveness guide for GC to:
- Unlock 5 critical areas to become a better strategic partner
- Understand and structure board presentations
- Access complimentary resources to act on key emerging risks
About Board Effectiveness
Directors owe their stockholders certain fiduciary duties, including the duty of oversight. Through Caremark International Inc. Derivative Litigation (Caremark) and its progeny of cases, U.S. courts have established the duty of oversight as requiring a good faith effort to establish board-level reporting or information systems with respect to “central compliance” risks and to monitor those systems, including by addressing “red flags.” This oversight duty is a critical component of board effectiveness.
Effective boards hold their executives accountable in performing their roles and sufficiently oversee strategy and risk. However, this job is increasingly difficult, as directors face a complex set of emerging and evolving risks to oversee and increased scrutiny on the effectiveness of their risk oversight. This is a time when boards need to be effective. Unfortunately, based on the Gartner board effectiveness survey, only 45% of boards are effective.
The duty of oversight is not new, but this increased scrutiny on how effectively boards oversee risk and strategy warrants increased attention. To improve overall board effectiveness, GC should:
- Evaluate current board oversight using a three-part framework comprising governance, information sharing and risk management
- Bolster the effectiveness of board oversight activities by taking actions to close gaps and strengthen weaknesses identified in their evaluation
Board Effectiveness FAQs
What is the main driver of board effectiveness?
Board effectiveness is driven by the quality of and relationship between directors and the board’s access to quality information. Increasing director quality and social dynamics can lead to a maximum improvement of 66% in board effectiveness, while increasing information access and quality can lead to a maximum improvement of 8% in board effectiveness.
Why is it important for GC to establish an effective system to support the board?
Given the heightened regulatory pressure, expanding disclosure requirements, and increased personal liability for directors, having an effective board is more crucial than ever. General Counsel (GC) must implement robust systems to support the board, thereby enhancing the consistency and quality of board oversight while alleviating the decision-making burden on the GC.
What are the 5 critical areas to enhance board effectiveness?
The 5 critical areas for GC to become a better strategic partner are:
- Communicate AI regulatory updates and manage AI governance
- Monitor cybersecurity risks and manage disclosures
- Reporting misconduct
- Improve information governance
- Build and maintain an ESG program