- 05 Jul 2006
- Working Paper Summaries
Improving Corporate Governance with the Balanced Scorecard
Overview — The authors review the key roles of corporate boards and recommend a Balanced Scorecard approach to help boards work smarter, not harder. Kaplan and Nagel recommend a three-part Balanced Scorecard program: Part 1: An Enterprise Scorecard that includes enterprise-wide strategic objectives, performance measures, targets, and initiatives; Part 2: A Board Scorecard that defines and clarifies the strategic contributions and requirements of the board, and provides a tool to manage the board's performance; Part 3: Executive Scorecards, which define strategic contributions of top management and are used to select, evaluate, and reward senior executives. Key concepts include:
- Reforms such as Sarbanes-Oxley have increased the amount of work that boards need to do. A Balanced Scorecard approach can help boards use their limited time effectively.
- An enterprise strategy map and enterprise Balanced Scorecard should be the primary documents distributed to the board in advance of meetings.
The paper identifies and briefly discusses the following primary responsibilities of a corporate board of directors:
- Approve and monitor the enterprise's strategy
- Approve major financial decisions
- Select the chief executive officer, evaluate the CEO and senior executive team, ensure executive succession plans
- Provide counsel and support to the CEO
- Ensure compliance