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Board Management Principles

The principles of management for boards are a set of best practices that can help boards fulfill their governing mission. They include the use of annual assessments to evaluate a board’s performance, the appointment of an independent chair, the inclusion of nonmanagement directors in CEO evaluations as well as the use of executive meetings for discussions of how to start a board meeting sensitive issues like conflicts of interest.

A board has a duty to act in the best interests of the company, as well as its shareholders over the long-term. While a board must take into consideration the opinions of shareholders, it is also responsible to exercise its own independent judgment. The board should also assess the potential risks that could impact the company’s ability to create value in the short and long term, and weigh these factors when evaluating the effectiveness of corporate decisions and strategies.

Therefore, there isn’t a universal model for a board’s design and composition. Boards should be prepared to try different models, and think about what they could do to improve their overall effectiveness.

Some boards are prone to adopting a geographic or special-interest-group representation model in which each director is perceived to represent the views of individuals located in a particular geographical area. This can result in boards that are a bit insular and unable to effectively tackle risks and issues that confront the company. Boards should be aware of the growing focus on governance, environmental and social (ESG) concerns of investors demands that they be more flexible than in the past.

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