The board of directors is the heart of a company's governance: it sets direction, oversees executive management and holds it accountable. Yet many boards drift over time into formal meetings that approve decisions prepared in advance, without real discussion or follow-up. In this article we review the elements that make the board and its committees an effective decision-making tool.
Separating Oversight from Execution
The first rule of governance is that the board oversees; it does not run the day-to-day business. The board approves strategy, the budget and key policies, and monitors performance and risk, while executive management carries out the work. When the board intervenes in operational detail, its oversight role weakens and accountability is lost.
The Board Charter
The board should have a written charter governing its work, consistent with the Companies Law and the company's bylaws, which typically covers:
- The board's powers and the matters it reserves to itself and does not delegate.
- How meetings are called, the agenda, and the advance circulation of materials.
- Quorum, voting and the handling of conflicts of interest.
- Periodic evaluation of the board and its members.
Board Committees
Committees allow the board to study specialised matters in depth before deciding. The most prominent include:
- The audit committee: oversees the financial statements, internal control and the external auditor, and is among the committees required by the regulations in joint stock companies.
- The nomination and remuneration committee: handles board membership criteria and remuneration policies for directors and senior executives.
- A risk committee or executive committee: depending on the nature and size of the company's business.
The Corporate Governance Regulations issued by the Capital Market Authority impose additional requirements on listed companies regarding the formation of committees and the independence of their members, so the requirements applicable to each company must be checked according to its legal form and status.
The Board Secretary: An Underestimated Role
The secretary is not merely a minute-taker but the guarantor of the board's orderly functioning. Their duties include:
- Preparing the agenda in coordination with the chair and circulating materials in good time.
- Recording minutes accurately, including reservations and material discussions.
- Following up on the implementation of resolutions and reporting on progress.
- Keeping the board's records and resolutions in an organised, easily retrievable manner.
Warning Signs That Call for a Review
- Decisions approved without written materials or prior study.
- Generic minutes that do not show who decided what and why.
- Committees that exist on paper without actual meetings or reports.
- No evaluation of the board's performance since it was formed.
Building an effective board is cumulative work that starts with clear charters and regular practice. Our firm helps draft board and committee charters, assess the effectiveness of existing governance and propose a practical improvement plan.