What Is a Governance Model?
A governance model provides boards of directors of businesses and organizations with a framework for making decisions. The model defines the roles of the board of directors and key employees of the organization. A governance model also identifies a process for boards to receive reports on areas such as finance, operations and risk management.
A governance model clarifies the oversight responsibilities of a board of directors and helps them to advise management on policy adoption. Members of a board usually sit on committees that deal with a particular area, such as audit or compensation. A governance model also provides a board with a structure for hiring and working with a chief executive.
Governance models may vary depending on the country and the nature of the organization. In the United States and the United Kingdom, corporations typically have boards that are composed of company executives and non-executive directors who are elected by shareholders. There are usually more non-executive than executive directors on boards.
Non-profit organizations have different governance models. For example, one approach is the advisory board model, in which board members may offer staff guidance. Sometimes board members have expertise in a field the organization may not be able to pay for. Another non-profit governance model is the patron model, where board members primarily focus their attention on fundraising.