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Governance: Board of Directors Effectiveness

Three targets with focus on the one in the center and arrows hitting the center. Concept of competitive excellence and performance.

On February 26, 2021, The Board of Governors of the Federal Reserve System issued guidance on the “Supervisory Guidance on Board of Directors’ Effectiveness.”

This guidance focuses on a board’s performance of its core responsibilities in describing five key attributes of an effective board. Although the guidance is directed to all domestic bank holding companies and savings and loan holding companies with total consolidated assets of $100 billion or more, in my view, it’s good guidance in general.

Board Effectiveness

Survey

This is sound but not new guidance. However, it did remind me of a recent survey that looked into top-performing boards.  Below are some excerpts from the survey.

“Many times, it seems boards spend too much time on operational performance versus strategic issues,” one director wrote in the survey this year. “We eat what we are fed.”

Closing 

As the organization’s ultimate decision-making body, fundamentally, the Board of Directors plays two critical roles: overseeing management on behalf of shareholders and other constituencies; and advising management, albeit with limited involvement in everyday company operations. Today there is a lot of pressure on Boards to improve their performance and oversight, which means there needs to proper composition to help drive board engagement.

I welcome your thoughts and comments.

Best,

Jonathan T. Marks, CPA, CFF. CFE

 

Attribution

Russel Reynolds 2019 Survey or Study – Global Board Culture and Director Behaviors Survey

SR 21-3 / CA 21-1:  Supervisory Guidance on Board of Directors’ Effectiveness

 

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