Governance Pro - Corporate Governance in Transition March 2022

Corporate Governance in Transition March 2022

Organizational governance, by its very definition, imposes significant power, authority, influence, obligations and accountability on those acting on behalf of shareholders, investors, members, residents and other expressions of constituency. Often legislation (i.e. Dodd Frank) and regulation prescribe the extent to which the governance body is empowered to act, to set policy, and carry out its many functions.

Notwithstanding legislative prerequisites, a preeminent and overriding tenet to governance activity is the prudent person principle: A prudent person is one who exercises the degree of care, skill and diligence that an ordinary prudent person would exercise in the same or similar circumstance. In other words, the exercise of good judgment and common sense in handing challenging, emerging and unforeseen organizational matters is paramount. Governance functions typically include carefully defining the organizations mission, its core values and its policies; the careful selection and retention of a competent Chief Executive Office; evaluating results and taking appropriate and timely corrective action where necessary; plus periodically accounting to the organizations constituency.

The COVID-19 pandemic of 2020 has revolutionized many traditional governance communication norms and long standing exercise-of-duty models, in person board meetings, paper-based reports, off-site board meetings, and more. Connectivity and communication between the members of the governance body has by necessity dramatically changed from assembly to digital interaction by means of a cyber-attack protected Board Portal, virtual board meetings, confidential reports, agendas, as well as opportunity for interaction between board members. The extent to which this medium can effectively be designed and utilized is in many instances limited to the digital acumen of individual board members and/or their willingness to change and become proficient in digital applications.

Another significant change in progressive boards is the thoughtful development of a Skills Matrix that guides the Nominating/Corporate Governance Committee in the recruitment and selection of new board members with a variety of skill-sets. Typically one person on the board should have demonstrated expertise in accounting, finance, and economics. Without question one board member should have considerable expertise in information technology. Additionally, depending on the nature of the organization, skill-set requirements might include marketing, human resource management, a high community profile, governmental affairs, corporate management, investments, and more.

Collectively, individual board members with expertise in a broad range of corporate requisites constitute a balanced, multi-disciplined decision-making process focused on longer term growth, financial health and vitality of the organization. Additionally, many organizations have undertaken to annually conduct a board member performance appraisal to ensure each is making a worthwhile contribution and performing their responsibilities effectively. Many are using Governance Pro; a fully customizable board performance evaluation software program to identify areas where board members might improve their contribution to the organization.
st importance to the policymaker group.

COVID-19 has forced many organizations to totally rethink their business plans, processes and productivity. Evolutionary change has accelerated to become revolutionary change! Home offices are significantly reducing the need for corporate office space, parking lots, as well as decreasing both daily automobile traffic and impacting public transportation systems. What about your organization? What changes have you already undertaken to respond to this changing environment and what changes are under consideration as you change from a pre-COVID-19 business model to a post-COVID-19 business model?

Corporate governance bodies willing and able to adjust to the new norms will already have made significant adjustments to how they conduct their fiduciary duties and responsibilities in the post-pandemic era.