A good Ethics Officer will
encourage the Board of Directors to set specific inspirational
goals
of legal compliance and business ethics.
The board's relationship to management is critical to good corporate governance. The board has to set its goals in this regard. Management and the board of directors need to know their respective roles, and for this knowledge to occur and exist, there needs to be a set of goals for the board's involvement in management.
The board selects the president and other officers of the corporation. Management must be free to manage, once it has been selected. But the board cannot be too trusting of management. The board has the responsibility to question the management assertions, to evaluate company performance, and if necessary take corrective action. To accomplish the Board member's responsibilities to:
- question management,
- evaluate company performance, and
- take corrective action, when needed---
the Board has two critical steps to take.
# 1. The board has to adopt and approve the strategic direction of the company and make a set of legal compliance goals and ethics goals that are inspirational in nature. This is important. That is why it is first on the list of good corporate governance!
# 2. Then the board must make a framework to monitor (1) the management of business opportunities and risks and (2) the actual company performance (as distinguished from management's report of company performance, which may be different), and (3) the performance of the CEO and the CFO.
Boards must have the capacity, independent of management, to fulfill these monitoring responsibilities. This requires not only the assets to accomplish these responsibilities, but also a corporate culture that allows both management and the board to feel comfortable that these monitoring activities take place.
The successful corporate board ethics culture will include:
- strong board members who are independent of management;
- strong leadership within the full board from an outside director;
- a CEO and a CFO who understand the monitoring functions of the directors and are openly supportive of the monitoring.
- regular meetings of the outside directors without management directors present, to build relationships and confidence and cohesion among the outside directors.
Once the board has its ethics and compliance goals and a plan for monitoring in place, then the board is in a position to develop the strategic governance plan and implement it.
