Search this website. You can use fund codes to locate specific funds

Guiding Principles for an Effective Board - Insights from Engagement

EOS publishes new white paper on board effectiveness

Fast reading

  • The paper focuses on the human, relational, and behavioural aspects of a board
  • We set out five guiding principles to help determine board effectiveness
  • Engagement provides valuable insights into how well a board is functioning

Investors care deeply about how well a company board is functioning. Getting this aspect of governance right makes it more likely that material risks and opportunities will be well managed. It follows that an effective board is best placed to secure a company’s long-term success.

Yet it remains difficult to assess board effectiveness. Disclosure on the measurable aspects of boards, such as board size, the age and tenure of directors, and the level of meeting attendance, is improving in some markets. While we welcome these developments, the set of standardised data points provided in company disclosures offer a limited picture of a board’s functionality. Ticking all the “good governance” boxes does not necessarily translate into good governance.

Engagement between investors and board directors provides a valuable opportunity to more deeply assess how well a board is functioning. This paper highlights the factors that we consider to be most important in determining board effectiveness. Our insights have been informed by engagement with directors from a wide range of sectors, markets and structures of corporate control.

The paper focuses on the human, relational, and behavioural aspects of a board, which are difficult to capture through a data point. There is increasing pressure on boards to get their approach right, given the high degree of scrutiny from regulators and the public, and the evolving corporate context. A board can interpret and apply the five guiding principles outlined in this paper according to a company’s particular requirements, with the ultimate goal of enhancing board effectiveness.

Related Insights

Votes for change
This year we saw a number of companies offering shareholders a vote on their climate transition plans, including some in the oil and gas, construction, aviation, and consumer goods sectors.
Salary or sick leave – the impossible choice
In the United States, the lack of national paid family and medical leave policies underpins many difficult, often impossible, choices faced by disproportionately impacted worker populations.
Siemens Energy case study
Siemens Energy is addressing the challenges of the climate transition by setting science-based emissions reduction targets.
A watershed for climate change stewardship?
Mainstream sentiment has shifted, and the momentum is with investors calling for faster action on climate change.
Abate and switch: steel seeks low carbon solutions
Steel is considered a hard-to-abate sector, but national net-zero commitments and pressure from customers mean that solutions must be found to help drive down emissions.
Nature’s larder – why food producers must safeguard biodiversity
As many of the risks associated with the decline of nature are concentrated in the agricultural supply chain, it is imperative that companies develop a comprehensive understanding of how biodiversity underpins their business model.

EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS