Board Governance
ESOP Board Governance
How employee-owned companies are governed — and how their boards can govern well.
ESOP board governance refers to how the board of an employee-owned company oversees management, strategy and risk within the ESOP's ownership structure. The board's core duties are the same as any corporate board. What differs is its relationship with the ESOP trustee, the annual valuation, the repurchase obligation and the long-term interests of employee-owners.
Core elements
- The role of the board
- The trustee relationship
- Board composition and independent directors
- CEO evaluation and succession
- Oversight of the repurchase obligation and capital planning
Practices many well-governed ESOP boards share
- A mix of management and independent perspectives
- Clear separation between board, management and trustee roles, with documented handling of conflicts
- A regular calendar covering strategy, succession, risk, valuation and repurchase obligation
- Thoughtful orientation for new directors on the ESOP structure
- Periodic evaluation of the board's own effectiveness
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