Source: cyprus-mail.com
A board of directors should do far more than approve policies, attend meetings and tick compliance boxes. Its real value lies in making better decisions, challenging management, managing risks and helping businesses grow, according to Petros Maroudias, partner, tax and legal services, and Stavroulla Ioannou Kyrou, senior manager, tax and legal services.
The two experts explained that although compliance remained a fundamental component of corporate governance, it should be the starting point rather than the ultimate objective.
Effective governance, they said, helped organisations manage uncertainty, strengthen stakeholder confidence and create sustainable long-term value.
The question for boards should therefore not simply be, “Are we compliant?” but “Is our governance helping us make better decisions and build a stronger business?”
Maroudias and Ioannou Kyrou explained that one of the clearest ways governance created value was by improving decision-making.
In a well-governed organisation, responsibilities were clear, management understood which decisions it could make and which required board oversight, and directors received relevant information at the right time.
They pointed to practical mechanisms, including a clear schedule of matters reserved for the board, appropriate committee terms of reference and a well-designed delegation-of-authority framework, as essential tools for establishing accountability.
Information quality was equally important, they added, stressing that “More information does not necessarily result in better decisions.”
Instead, board reporting should focus on key issues, risks, recommendations and the decisions required.
They also emphasised the importance of maintaining a credible decision-making trail, with minutes, resolutions and supporting records providing evidence of how significant matters were considered, challenged and decided.
Turning to what made a high-performing board, the two experts explained that governance frameworks provided the structure, but their effectiveness depended on the people around the board table and how they worked together.
A successful board, they noted, needed the right capabilities and perspectives, quality information, constructive challenge, clear accountability and effective behaviours.
Board composition should also evolve alongside the organisation’s strategy, risks and ambitions, bringing together industry knowledge, technical expertise, commercial judgement and relevant experience.
According to Maroudias and Ioannou Kyrou, “Different backgrounds and perspectives can broaden discussion, challenge assumptions and reduce the risk of groupthink.”
They further explained that effective boards created an environment where directors could question assumptions, debate alternatives and raise difficult issues.
Clear responsibilities remained essential, with the board providing strategic direction and oversight and management taking responsibility for execution.
Decisions, they added, should translate into actions with clear ownership, appropriate timelines and disciplined follow-through.
Equally, a forward-looking board agenda should allow sufficient time for strategy, risk and future opportunities rather than being dominated by immediate operational matters.
Beyond internal decision-making, Maroudias and Ioannou Kyrou drew attention to the importance of stakeholder confidence, describing trust as an increasingly valuable corporate asset.
Investors, lenders, employees, customers, suppliers and other stakeholders, they explained, wanted confidence not only in an organisation’s financial performance but also in how it was led and controlled.
“Transparent decision-making, meaningful oversight and clear accountability help build that confidence,” they stressed.
Effective governance should also help boards understand relevant stakeholder perspectives and consider them when making significant decisions, rather than treating stakeholder engagement solely as a reporting or communication exercise.
The two experts also rejected the idea that governance and entrepreneurship were competing objectives.
Instead, they explained that “Good governance performs two complementary roles: protecting value and enabling value creation.”
Its protective role included internal controls, risk management, ethical standards, accountability and effective oversight.
Importantly, they argued, governance should be proactive, identifying potential weaknesses before they resulted in regulatory, financial or reputational consequences.
At the same time, it should give management the confidence to pursue opportunities through clear decision rights, risk parameters and escalation arrangements.
As they explained, “Boards cannot eliminate uncertainty, but they can create a framework through which risks and opportunities are identified, challenged, and incorporated into strategic decisions.”
Maroudias and Ioannou Kyrou also highlighted the distinction between governance activity and governance outcomes, arguing that organisations should increasingly assess whether their governance arrangements actually worked.
Rather than counting meetings, approved policies or reports produced, businesses should examine whether governance had contributed to better decisions, earlier identification of risk, clearer accountability, stronger oversight and more effective execution of strategy.
Boards should therefore examine the full decision-making cycle, from the quality of information available beforehand to the level of challenge and debate during discussions and the follow-through afterwards.
According to the two experts, “This shift from governance activity to governance outcomes is essential if governance is to become a genuine business enabler.”
Ultimately, they concluded that effective governance should “create clarity without unnecessary bureaucracy, challenge without paralysis and control without suppressing entrepreneurship.”
Their final message to businesses was straightforward, as they explained that “It is not about having more governance. It is about having the right governance, brought to life by a high-performing board that builds trust, improves decisions and supports sustainable long-term value.”