Taking it to the board
WELL, IT’S that time again – time to start rolling out the New Year’s resolutions. Some of us will vow to eat less, exercise more, live in the moment, be more grateful. You may even decide to start speaking with the family member who drives you so crazy.
But what about the New Year’s business resolutions for boards in New Zealand? This time of year is a great time to start making – and keeping – business resolutions, too.
Sadly, like our personal goals, we often make them (year after year) with sincere intent only to see them quickly fall by the wayside, as we revert to (bad) habits that we have vowed to break.
A good way to start the New Year is to revisit a few guiding principles for all boards in New Zealand. My top 10 follows: The duty of the board of directors of a public company is to select a chief executive officer and to oversee the CEO and senior management in the competent and ethical operation of the company on a day-to-day basis. Management is responsible (under the oversight of the board) for operating the company in an effective and ethical manner that provides long-term value for shareholders. The board of directors, the CEO and senior management should set a ‘‘tone at the top’’ that establishes a culture of legal compliance and integrity. Directors and management should never put personal interests ahead of or in conflict with the interests of the company. Management is responsible (under the oversight of the board) for developing and implementing the company’s strategic plans, and identifying, evaluating and managing the risks inherent in the company’s strategy. The board of directors should understand the company’s strategic plans, the associated risks, and the steps management is taking to monitor and manage those risks. The board and senior management should agree on the appropriate risk profile for the company, and they should be comfortable that the strategic plans are consistent with that risk profile. Management is responsible (under the oversight of the audit committee and the board) for producing financial statements that fairly present the financial condition and results of operations of the company and for making the timely disclosures investors need to assess the financial and business soundness and risks of the company. It is the responsibility of the board, through its audit committee, to engage an independent accounting firm to audit the financial statements prepared by management and issue an opinion that those statements are fairly stated in accordance with Generally Accepted Accounting Principles, as well as to oversee the company’s relationship with the outside auditor. It is the responsibility of the board, through its corporate governance committee, to play a leadership role in shaping the corporate governance of the company and the composition and leadership of the board. The corporate governance committee should regularly assess the backgrounds, skills and experience of the board and its