It is through exceptional leadership that organizations are able to prosper through the current economic crisis. Effective corporate governance must be emphasized in all organizations no matter, the size because of the role played by the Board of Directors. In such a crisis, it is more critical than normal, that the Board of Directors plan effectively and take tough and strategic decisions. Proper Board procedures are required to be in place with all directors fully understanding their role and having the special skills needed. This is because the Board oversees how the management serves and protects the long-term interests of all the stakeholders of the company. To enhance Board effectiveness, there must be a mechanism for periodic assessment of its performance. Board effectiveness is the Board’s ability to perform its control and service tasks effectively. For a Board to be effective it must adhere to the necessary laws and regulations as a body and as an organization. Although, there is an increasing demand that Boards demonstrate leadership, control and deliver on their responsibilities and their company’s results so the expectation of the Board is to go beyond compliance. A very good emphasize on the Board oversight role in the local context is by the regulator of financial institutions. The regulation on corporate governance for banks clearly brings out the Board’s responsibility to oversee the senior management, empowering them to hold members of senior management individually accountable for their actions. It also enumerates the possible consequences, including dismissal, if those actions are not aligned with the Board’s performance expectations. The other aspect is the structure. As per the regulation, the Board must structure itself in terms of leadership, size and the use of committees to effectively carry out its oversight role and other responsibilities. The Board must also maintain and periodically update organizational rules, by-laws, or other similar documents setting out its organization, rights, responsibilities and key activities. The regulation also obliges the Board to carry out regular assessments of the Board as a whole, its committees and individual Board members to support its own performance. Board reviews enhance effectiveness and are the means by which the body can demonstrate they have the knowledge, skills and ability to fulfil their roles and responsibilities. Further, the regulation necessitates the Board to annually review its structure, size and composition as well as committees’ structures and coordination. The Chairperson should submit a report to the Central Bank, on the Board’s evaluations and effectiveness, not later than the 31 of March of the following year. In addition, the evaluation is disclosed in the annual report. Due to the importance, Board reviews should not only be left for banks but extended to large corporations and especially all public interest entities. Emphasize is made on external review since it is more independent and effective. External reviews also provide objectivity and helps the Board set up criteria on which to base future evaluations. The writer is an audit manager at BDO Rwanda
