Corporate governance training for Board of Directors
Enhancing the Board of Directors’ (BoD) understanding of the organization’s corporate governance structure and its role within it.
Corporate governance determines the relationships among an organization’s management, its BoD , its shareholders, and other stakeholders. In addition, it provides the structure through which the objectives of an organization are set, and determines the means of attaining those objectives and monitoring performance.
The role of the BoD within the corporate governance structure is to ensure the organization’s prosperity by collectively directing the affairs of the organization. Overseeing rather than actively managing the day-to-day operation, the BoD is responsible for the organization’s governance, and for meeting the interests of its shareholders and stakeholders.1,2 BoDs mostly consult with management on the organization’s strategic and operational direction, as well as monitor the organization’s performance and reduce agency costs. 3
PURPOSE & LINK TO INTEGRITY
Weak corporate governance and politicization of service delivery often undermine cost-effective and efficient management and operation of water services.4 Good corporate governance should provide proper incentives for the BoD and management to pursue objectives that are in the best interests of the organization and its stakeholders and should facilitate effective monitoring.5 Through training of the BoD on corporate governance, its members can enhance their knowledge, skills, and competencies on the principles of corporate governance, as well as on their own role within the corporate governance system.
Familiarizing the BoD with the principles of corporate governance provides a basis to foster their upright behaviour.4 Trainings on corporate governance can contribute to reduce fraud and corruption, and to ensure that the BoD works efficiently.
- Does your organization have a corporate governance structure in place? (See also the tool Corporate governance structure)
- Does your corporate governance structure comply with possible legal and regulatory requirements?
A training plan should be developed that ensures that all existing and all new members of the BoD undergo a corporate governance training. The training should be conducted by an individual with high seniority who is well-respected among the BoD members, by the regulator or via peer-to-peer learning. It should familiarize BoD members with the concept of corporate governance as well as specific standards. Training contents can include:4
- Benefits of corporate governance
- Ensuring the organization’s profitability, efficiency, credibility, and financial stability
- Improving relationships between stakeholders
- Establishing ethical businesses with the capacity to create wealth and employment
- The BoD’s roles and responsibilities
- Standards of integrity, ethical behaviour, transparency, and disclosure
- Rights and equitable treatment of shareholders
- Interests of stakeholders, including shareholders, managers, customers, suppliers, employees, labour unions, communities, investors, creditors, policy-makers and other players in the water sector.
KEY GUIDING DOCUMENTS
OECD, 2004, The OECD principles of Corporate Governance, 2004, Organisation for Economic Cooperation and Development (OECD), France
WASREB, 2009, Corporate governance guidelines for the water services sector, Water Services Regulatory Board (WASREB), Kenya
PwC, 2005, Corporate governance toolkit for small and medium enterprises, PricewaterhouseCoopers (PwC), USA
ASX, no year, ASX Corporate Governance Council Principles and Recommendations, The Australian Securities Exchange (ASX), http://www.asx.com.au/governance/corporate-governance.htm, accessed 19.11.2015
- ProMetic, no year, Board of Directors Charter, ProMetic Life Sciences Inc., Canada
- Brefi Group Limited, 2000, The Board of Directors – roles and responsibilities, Brefi Group Limited, UK
- Larcker, D. F., and Tayan,B., 2011, Board of Directors: Duties & Liabilities, Stanford Graduate School of Business
- WASREB, 2009, Corporate governance guidelines for the water services sector, Water Services Regulatory Board (WASREB), Kenya
- OECD, 2004, The OECD principles of Corporate Governance, 2004, Organisation for Economic Cooperation and Development (OECD), France