How corporate boards can forge healthy relationships with managers

31/01/2023, 08:22

Corporate directors face an ongoing challenge when it comes to fostering constructive working relationships with managers, but relationships that strike the right balance are good for everyone and good for business.

The National Association of Corporate Directors (NACD) recently released resources designed to help directors navigate that and other challenges.

The NACD's 2023 Governance Outlook reviewed results of the association's annual Board Trends and Priorities Survey, revealing that nearly three in five directors view an improvement in the candor of board-management discussions over the next 12 months as important or very important.

To that end, the NACD released a guide with frequently asked questions, "The Role of the Board vs. the Role of Management." The guide defines parameters for a healthy relationship between directors and managers; poses key questions for board members to consider; and recommends next steps.

The guide addresses a range of topics to help answer two questions:

How do board and management roles differ?
Where is the dividing line between them?

The introduction to the guide mentions the "important distinction between observation and advice, versus action." That's related to a phrase coined by NACD founding president John Nash — "nose in, fingers out," which calls for board members to oversee and advise managers without assuming a heavy-handed role in day-to-day operations.

The 2023 Governance Outlook, in addition to sharing survey-supported insights about board-management relationships, offers perspective on potential points of focus for directors in the coming year, among them oversight of human capital; environmental, social, and governance issues; and third-party risk.

The report also includes chapters examining the impact of pending SEC rulemaking; factors that will affect the 2023 proxy season; and a look at key issues to consider related to threat liability and the purchase of director and officer liability insurance.

Source: www.journalofaccountancy.com

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