Policymaking is one of the principal elements of the board's performance roles.
Company policies are documented sets of basic principles and associated guidelines, that are formulated and enforced by the board or an assigned committee of an organisation. They direct and limit the organisation's decisions and actions in pursuit of its objectives.
Policies enable strategies to be implemented. They should contain enough detail to make the organisation's position clear, but it is unrealistic to expect them to cover every potential situation addressed by the policy.
They should be communicated to relevant staff, shareholders and other interested parties.
Policies are most effective as official written documents. While policies often differ in form, depending on company size, industry, and length of time in business, they are likely to include certain standard components: -
Additional sections may include:
Although they must be approved and adopted by the board, policies need not be developed by the board. It is better to involve the most appropriate people to devise and oversee the development of policies and this could be done by setting up a committee or working group.
In many cases it is desirable to consult stakeholders, including the board, employees, and other stakeholders who will be affected by the policy throughout the development and implementation stages. This can be done using surveys, questionnaires, emails and team meetings.
Are your organisation's policies properly supported by the board?
* Inspired by the Institute of Directors Standards for the Board
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