Companies have board members whose position results from their responsibilities as managers of the business, who are representatives of investors, or are independent members of the board. Board members have responsibilities and duties, and must behave in compliance with certain best practices.
These board member best practices and apply to the whole board. The board member duties are:
Components of strategy that are the responsibility of the board:
All members of the board should seek to understand and support the business strategy and should challenge that strategy in the context of their individual understanding of market and product and service developments in accordance with the market best practices.
A key element of business strategy execution is the identification and assessment of risk and opportunity, including the decisions as to what levels of risk are acceptable, in compliance with market and corporate best practice, what risks are associated with each opportunity and how to manage the business accordingly.
All members of the board should participate in risk and opportunity identification and assessment across all business areas and including financial and non-financial factors.
The components of risk management include the values of the organization, the allocation of roles and responsibilities and the design and implementation of processes and best practices relating to the identification and control of risk, and the measurement of and reporting on performance.
All members of the board have a responsibility towards risk identification, risk management and risk control and should take an active
interest in establishing effective procedures which allow such identification and control of risk. Members of the board
should actively seek assurance that risk management procedures and best practice are in place and are operating effectively.
The structure and remuneration of company executives and senior management should provide incentive for performance and reward for results. Balancing remuneration in the context of the relevant industry best practices, the expertise and contribution of individuals and the long-term needs of the business are key roles of the board. The board’s role should also be focused on ensuring that incentives established continue to be appropriate as the circumstances of the business change over time scales which are appropriate both for the business and for its shareholders.
The board should determine appropriate levels of remuneration of executives and should keep levels of remuneration under review. Conflicts of interest in establishing remuneration levels for board members should be avoided where possible and managed openly and constructively in all cases.