Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences

6. Organizational Strategy, Business Models, and Risk Management

As we mentioned in Chapter 3, “Board of Directors: Duties and Liability,” the Organization for Economic Cooperation and Development (OECD) states that one of the primary responsibilities of the board is to “ensure the strategic guidance of the company.” The Higgs Report recommends that directors “constructively challenge and contribute to the development of strategy.”¹ Furthermore, survey data from the National Association of Corporate Directors (NACD) indicates that directors themselves consider strategic planning and oversight to be their most important responsibility—more than financial oversight, CEO succession planning, compensation, and shareholder relations.²

Consensus holds ...