The Board of Directors is collectively responsible for the results of the company’s operations. All aspects of its activity are displayed in the Board report. So, how to create a good Board report?
Basic principles of Board of Directors activity
The activities of the Board of Directors are a key element of the company’s corporate governance system. The Board of Directors represents the interests of shareholders, being responsible for the growth of business value through the organization of effective management. The main goal of the Board of Directors is the conscientious and competent performance of the duties of managing the Company in order to ensure the growth of share value and the well-being of shareholders, as well as to protect their rights. At the same time, this body in its decisions acts fairly in relation to all shareholders and cannot be guided by the interests of only one group of shareholders.
Main functions of the Board of Directors include:
- carries out general management of activities, determines the long-term development strategy of the company, and makes various decisions within the framework of the developed strategy;
- evaluates the performance of the company and its bodies;
- determines the structure and composition of the management board of the company;
- gives consent to the execution or subsequent approval of major transactions and transactions in which there is an interest / within its competence /;
- evaluates political, financial, and other risks affecting the company’s activities;
- develops systems and methods of material incentives for company employees.
How to write a good report: useful tips
A Board report is a descriptive document prepared by the board of directors, which provides additional financial information that is not regulated by accounting and reporting standards, and various non-financial information related to corporate social responsibility. Management’s report enables management to review performance and explain why it differs from planned and provides investors with information on how external and internal factors may affect the entity’s performance and whether management’s actions have contributed to the objectives.
When developing documents that affect corporate governance, it is necessary to involve in the process lawyers who understand the problems, practices, and procedures of corporate governance, and who, at the same time, are specialists in matters of legislation on joint-stock companies.
Preparing a report for your organization’s board of directors can be intimidating. A well-formatted report for executive management consists of three major sections:
- the executive summary,
- research and analysis of alternatives,
- recommendations.
The Board Report focuses on the following aspects:
- shareholders ‘rights, including recommendations on the use of electronic means to participate in voting and receive meeting materials, as well as to protect shareholders’ dividend rights;
- building effective work of the board of directors – defining approaches to the reasonable and conscientious performance of the duties of members of the board of directors, defining the functions of the board of directors, organizing the work of the board of directors and its committees;
- clarification of requirements for directors, including directors’ independence;
- recommendations for building a remuneration system for members of management bodies and key executive employees of the company, including recommendations for various components of such a remuneration;
- recommendations for building effective risk management and internal control system;
- recommendations for additional disclosure of material information about the company and its controlled entities and their internal policies;
- recommendations for carrying out significant corporate actions (increase in authorized capital, takeover, listing, and delisting of securities, reorganization, significant transactions), which ensure the protection of rights and equal treatment of shareholders.