One of the most important roles for a company’s Board of Directors is to set policy under which management takes action to manage the affairs of an organization. Yes, even for small start-up businesses.
Corporate governance is the system of rules, practices and processes by which a business is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s shareholders, management, customers, suppliers, financiers.
The governing policy is set by and authorized by the BOD. Policy at this level is directional in nature and provides management with a broad framework within which management should make its decisions. The policy needs to be clear on what is permissive, what is restricted and what authorities are delegated.
Management must abide by governing policy and any exceptions must be supported with clear and sound rationale and submitted to the Board for explicit approval.
Management policy is the policy that is set by and authorized by the CEO or company management. Policy at this level sets the nature of how operations will be managed. Management policy must be aligned with and support the governing policy. It should set clear parameters for staff to operate.
A single governing policy set by the BOD may require one or more management policies to provide sufficient direction to staff. Procedure are set by and authorized by management usually by the CEO.
Do you have any form of written governance policy in place for your business? Should you have policy standards in your start-up?