Case Study The composition and role of boards. The board of directors is the corporation's governing body. By law, the board is vested with the authority to manage the corporation's business and affairs, and the board's members have a fiduciary responsibility to act in the best interests of the corporation and its shareholders. Boards are thus collegial bodies in the traditional sense that their members share authority and responsibility, and have both individual and collective accountability. Boards typically delegate much of their authority to an executive team that carries out the day-to- day operations of the corporation's business. However, some board duties cannot be delegated, and boards vary widely in the extent of their involvement in the business. The board's core functions typically include selecting, monitoring, advising, and compensating the chief executive; monitoring the company's financial structure and declaring dividends; deciding on major transactions and changes in control; monitoring the company's financial reporting and internal controls; and overseeing the company's strategy, performance, risk management, and compliance with relevant legal and ethical standards. It is sometimes supposed that a sharp line can be drawn between governing and managing, but that line is neither sharp nor fixed. Even a board that normally focuses on high-level governance matters may find itself drawn into management issues when the company is in crisis or distress. The structure and leadership of boards, like the processes for selecting their members, vary widely by law and custom across jurisdictions. One visible and frequently noted difference is between unitary or single-tier boards, like those in the U.S., and two-tier boards such as those in Germany where companies typically have both a management board and a supervisory board. In the U.S., companies are frequently led by a single individual who serves as both chairman and CEO, whereas in other jurisdictions, the roles of chairman and CEO are more often separated and held by different individuals. In some jurisdictions, such as France or Hong Kong, it is customary for directors to be elected for multi-year terms on a staggered basis; in others, all directors are voted on annually. The laws and norms of some jurisdictions require boards to include a certain number of directors elected by employees or other constituency groups, or to have a defined mix of shareholder and employee representatives. Processes for nominating directors also vary, as do the roles and composition of board committees, although many jurisdictions require boards to have audit, remuneration, and nominating committees with at least a majority of directors who are independent. Despite such differences, the past few decades have seen several trends in board composition that cut across jurisdictions. One is a growing presence of female directors who, once rare, are now mandated in some countries to be at least 40% of the board's total. The overall percentage of female directors remains low relative to their numbers in the workforce, but the pace at which female directors are being added appears to be accelerating and surveys suggest that adding women to boards has been beneficial for those boards. Another cross-region trend is an increase in the percentage of directors who are "independent," in the sense that they have neither commercial nor family ties with the company or its management and are thus presumed to have a higher or more reliable capacity for objective judgment. Over the past decade, boards have become more independent, and independent directors have become more likely to meet in "executive" sessions separate from the management members of the board. Across the globe, high-performing boards are seeking to improve their effectiveness through more systematic self-assessment and succession planning, and by adding members with a more diverse set of skills, perspectives, and backgrounds. Even though the functioning of boards is generally thought to have improved in recent decades, questions remain about the ability of boards, especially those of large public companies, to do the job expected of them. Dueling interpretations of the board's fiduciary duty only complicate the challenge. In 2018, for example, the UK Government announced new regulations clarifying the duties of pension fund trustees to consider the environmental, social, and governance risks and opportunities in the investment process. By comparison, the U.S. Department of Labour recently issued a bulletin urging pension fund fiduciaries to be cautious in considering environmental, social, and governance factors when making investment decisions. Although these pronouncements were both directed to pension fund fiduciaries rather than company directors, the underlying issue is one that company directors face as well and that is likely to be a source of ongoing tension in the years to come.