When running an organization, it is important to have a board of directors who work well together. Making the right decisions at the board level and knowing what to do is called good corporate governance. This ensures that the company and everyone involved are making the right choices in best interests of all the stakeholders. According to the ISO 26000 guidelines for Corporate Social Responsibility (CSR), good governance is the top most indicator to be called a responsible organization. Though there are many reasons of board’s failure but I am going to write about five most common of them.
1. Irrelevant people at the board.
Some members may not have relevant skills, experience and qualifications or they may not be sure about the roles and responsibilities of their positions. Understanding the key information such as the financial reports, laws, and risk assessments etc. are some of the skills which are must for people on
the board of directors. Therefore, it is very important to have such people on the board who have the right skills, qualifications and experience to govern the corporations more effectively. They must also be up to date about all the relevant information such as economic and political conditions etc., as well as fully equipped to make informed decisions.
2. Lack of a strategic focus
This reason is somewhat linked with the first one where board of directors are unaware of the strategic direction of the organization. For example what is the vision and mission? What the long term and short term goals etc.? They are also unaware of the rules and regulations of the company which serves as a bible for the success of the organization. Since they are unsure of such key information, there are chances that they may take rules for granted or overlook them. As a result, they may be able to make necessary changes in the policies and procedures for the betterment of the organization.
3. Poor decision making
This lack of information and knowledge leads the board of directors to make uninformed decisions that are not in the best interest of the organization. Consequently, organizations face failures and losses to the least. Another reason for the poor decision making is the vested self interests of the members of the board. They may have some undeclared conflict of interest which may lead them to poor decision making and against the interests of all the stakeholders. This is an important component of CSR to make decisions keeping in view the rights of all the stakeholders. Responsible decision making must be promoted by the chairman of the board in order to make the organization more sustainable, strong and grow faster.
4. Risk Management
Among the main reasons of the financial crises of 2008 was poor risk assessment on part of the board of directors which led them to invest huge sums of money in high risk areas. Not recognizing potential problems and risks may put the organization’s survival in jeopardy just like we witnessed in 2008. Identifying the potential risks by the board members will help better manage the resources of the organization to survive through the stormy seasons. Therefore, whether it’s financial, human, or administrative problems; directors must know how to tackle them as they arise. Keeping a checklist of all the risks and problems may be a good idea to address them appropriately.
5. Deviant work behaviors
According to different studies, workplace deviant behaviors such as misusing the internet alone cost organizations more than $120 billion dollars annually in the US. Therefore, it is the responsibility of the directors to ensure effective use of funds and resources of the organization in a responsible way. This in itself is an example of CSR which I keep writing about in my other blogs. Such practices will leave a lasting impression on the banks, governments and suppliers. Similarly, if board of directors avoids such practices, the employees will also follow the same suit and therefore, less workplace deviance behaviors will occur. When running an organization, it is important to have a board of directors who work well together. Making the right decisions at the board level and knowing what to do is called good corporate governance. This ensures that the company and everyone involved are making the right choices in best interests of all the stakeholders. According to the ISO 26000 guidelines for Corporate Social Responsibility (CSR) good governance is the top most indicator to be called a responsible organization. Though there are many reasons of board’s failure but I am going to write about five most common of them.
1. Irrelevant people at the board.
Some members may not have relevant skills, experience and qualifications or they may not be sure about the roles and responsibilities of their positions. Understanding the key information such as the financial reports, laws, and risk assessments etc. are some of the skills which are must for people on
the board of directors. Therefore, it is very important to have such people on the board who have the right skills, qualifications and experience to govern the corporations more effectively. They must also be up to date about all the relevant information such as economic and political conditions etc., as well as fully equipped to make informed decisions.
2. Lack of a strategic focus
This reason is somewhat linked with the first one where board of directors are unaware of the strategic direction of the organization. For example what is the vision and mission? What the long term and short term goals etc.? They are also unaware of the rules and regulations of the company which serves as a bible for the success of the organization. Since they are unsure of such key information, there are chances that they may take rules for granted or overlook them. As a result, they may be able to make necessary changes in the policies and procedures for the betterment of the organization.
3. Poor decision making
This lack of information and knowledge leads the board of directors to make uninformed decisions that are not in the best interest of the organization. Consequently, organizations face failures and losses to the least. Another reason for the poor decision making is the vested self interests of the members of the board. They may have some undeclared conflict of interest which may lead them to poor decision making and against the interests of all the stakeholders. This is an important component of CSR to make decisions keeping in view the rights of all the stakeholders. Responsible decision making must be promoted by the chairman of the board in order to make the organization more sustainable, strong and grow faster.
4. Risk Management
Among the main reasons of the financial crises of 2008 was poor risk assessment on part of the board of directors which led them to invest huge sums of money in high risk areas. Not recognizing potential problems and risks may put the organization’s survival in jeopardy just like we witnessed in 2008. Identifying the potential risks by the board members will help better manage the resources of the organization to survive through the stormy seasons. Therefore, whether it’s financial, human, or administrative problems; directors must know how to tackle them as they arise. Keeping a checklist of all the risks and problems may be a good idea to address them appropriately.
5. Deviant work behaviors
According to different studies, workplace deviant behaviors such as misusing the internet alone cost organizations more than $120 billion dollars annually in the US. Therefore, it is the responsibility of the directors to ensure effective use of funds and resources of the organization in a responsible way. This in itself is an example of CSR which I keep writing about in my other blogs. Such practices will leave a lasting impression on the banks, governments and suppliers. Similarly, if board of directors avoids such practices, the employees will also follow the same suit and therefore, less workplace deviance behaviors will occur.
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1. Irrelevant people at the board.
Some members may not have relevant skills, experience and qualifications or they may not be sure about the roles and responsibilities of their positions. Understanding the key information such as the financial reports, laws, and risk assessments etc. are some of the skills which are must for people on
the board of directors. Therefore, it is very important to have such people on the board who have the right skills, qualifications and experience to govern the corporations more effectively. They must also be up to date about all the relevant information such as economic and political conditions etc., as well as fully equipped to make informed decisions.
2. Lack of a strategic focus
This reason is somewhat linked with the first one where board of directors are unaware of the strategic direction of the organization. For example what is the vision and mission? What the long term and short term goals etc.? They are also unaware of the rules and regulations of the company which serves as a bible for the success of the organization. Since they are unsure of such key information, there are chances that they may take rules for granted or overlook them. As a result, they may be able to make necessary changes in the policies and procedures for the betterment of the organization.
3. Poor decision making
This lack of information and knowledge leads the board of directors to make uninformed decisions that are not in the best interest of the organization. Consequently, organizations face failures and losses to the least. Another reason for the poor decision making is the vested self interests of the members of the board. They may have some undeclared conflict of interest which may lead them to poor decision making and against the interests of all the stakeholders. This is an important component of CSR to make decisions keeping in view the rights of all the stakeholders. Responsible decision making must be promoted by the chairman of the board in order to make the organization more sustainable, strong and grow faster.
4. Risk Management
Among the main reasons of the financial crises of 2008 was poor risk assessment on part of the board of directors which led them to invest huge sums of money in high risk areas. Not recognizing potential problems and risks may put the organization’s survival in jeopardy just like we witnessed in 2008. Identifying the potential risks by the board members will help better manage the resources of the organization to survive through the stormy seasons. Therefore, whether it’s financial, human, or administrative problems; directors must know how to tackle them as they arise. Keeping a checklist of all the risks and problems may be a good idea to address them appropriately.
5. Deviant work behaviors
According to different studies, workplace deviant behaviors such as misusing the internet alone cost organizations more than $120 billion dollars annually in the US. Therefore, it is the responsibility of the directors to ensure effective use of funds and resources of the organization in a responsible way. This in itself is an example of CSR which I keep writing about in my other blogs. Such practices will leave a lasting impression on the banks, governments and suppliers. Similarly, if board of directors avoids such practices, the employees will also follow the same suit and therefore, less workplace deviance behaviors will occur. When running an organization, it is important to have a board of directors who work well together. Making the right decisions at the board level and knowing what to do is called good corporate governance. This ensures that the company and everyone involved are making the right choices in best interests of all the stakeholders. According to the ISO 26000 guidelines for Corporate Social Responsibility (CSR) good governance is the top most indicator to be called a responsible organization. Though there are many reasons of board’s failure but I am going to write about five most common of them.
1. Irrelevant people at the board.
Some members may not have relevant skills, experience and qualifications or they may not be sure about the roles and responsibilities of their positions. Understanding the key information such as the financial reports, laws, and risk assessments etc. are some of the skills which are must for people on
the board of directors. Therefore, it is very important to have such people on the board who have the right skills, qualifications and experience to govern the corporations more effectively. They must also be up to date about all the relevant information such as economic and political conditions etc., as well as fully equipped to make informed decisions.
2. Lack of a strategic focus
This reason is somewhat linked with the first one where board of directors are unaware of the strategic direction of the organization. For example what is the vision and mission? What the long term and short term goals etc.? They are also unaware of the rules and regulations of the company which serves as a bible for the success of the organization. Since they are unsure of such key information, there are chances that they may take rules for granted or overlook them. As a result, they may be able to make necessary changes in the policies and procedures for the betterment of the organization.
3. Poor decision making
This lack of information and knowledge leads the board of directors to make uninformed decisions that are not in the best interest of the organization. Consequently, organizations face failures and losses to the least. Another reason for the poor decision making is the vested self interests of the members of the board. They may have some undeclared conflict of interest which may lead them to poor decision making and against the interests of all the stakeholders. This is an important component of CSR to make decisions keeping in view the rights of all the stakeholders. Responsible decision making must be promoted by the chairman of the board in order to make the organization more sustainable, strong and grow faster.
4. Risk Management
Among the main reasons of the financial crises of 2008 was poor risk assessment on part of the board of directors which led them to invest huge sums of money in high risk areas. Not recognizing potential problems and risks may put the organization’s survival in jeopardy just like we witnessed in 2008. Identifying the potential risks by the board members will help better manage the resources of the organization to survive through the stormy seasons. Therefore, whether it’s financial, human, or administrative problems; directors must know how to tackle them as they arise. Keeping a checklist of all the risks and problems may be a good idea to address them appropriately.
5. Deviant work behaviors
According to different studies, workplace deviant behaviors such as misusing the internet alone cost organizations more than $120 billion dollars annually in the US. Therefore, it is the responsibility of the directors to ensure effective use of funds and resources of the organization in a responsible way. This in itself is an example of CSR which I keep writing about in my other blogs. Such practices will leave a lasting impression on the banks, governments and suppliers. Similarly, if board of directors avoids such practices, the employees will also follow the same suit and therefore, less workplace deviance behaviors will occur.
Source
