On July 21, a diverse consortium of prominent corporate executives and business leaders released the compilation, “Commonsense Principles of Corporate Governance.” The compilation contains a series of recommendations within nine broad categories of governance, most of which are highly relevant to health care systems (whether for-profit or nonprofit).
The stated goal of the consortium members is to offer the recommendations as a set of “Principles” on which they found common ground, in the hope that they will promote further conversation on corporate governance. The group’s consensus reflects a shared belief that “empowered” boardmembers and shareholders contribute to long term corporate success through the provision of meaningful governance-based oversight. Indeed, the Principles draw an important connection between effective corporate governance and economic growth. As such, the Principles serve as an excellent topic for discussion by health system board governance committees, with the assistance of the system’s general counsel.
Those Principles most relevant to health system governance are those that address Board Composition, Director Responsibilities, Director Education, Committee Matters, Director Independence, Board Agenda, Director Refreshment, Succession Planning and Corporate Reputation.
Several of the Principles’ more progressive recommendations may prove controversial with some CEOs, especially those who wish to keep tight control of who has access to their boards, and to whom their boards have access. These potentially controversial Principles include those that promote (a) the use of outside advisors and experts in making board education presentations; (b) implementation of a pure, undiluted executive session practice; (c) “unfettered” board access to the entire management team; and (d) talent development practices that allow for direct board exposure to key company employees.
When advising leadership, the general counsel should be careful to describe the Principles both for what they are -- recommended, “commonsense” guidelines, and for what they are not -- absolute standards or “best practices.” The real value in the Principles is the opportunity their release offers for new, meaningful dialogue on governance matters within the board.