Director Handbooks

Getting Behind the Numbers

By John C. Fletcher and NACD Staff


Audit Committee Director’s Handbook Financial Oversight

Among the many responsibilities shouldered by corporate directors, one of the most important is active oversight of the company’s financial performance. For this reason, all directors should be financially literate.

This was a key recommendation of NACD in its pioneering Report of the NACD Blue Ribbon Commission on Director Professionalism more than two decades ago. The Commission  defined such literacy as the ability to “read a balance sheet, an income statement, and a cash flow statement, and … understand the use of financial ratios and other indices for evaluating company performance.”

The Commission recommended financial literacy as a goal for all corporate directors—not only those in public companies but also those in private companies and nonprofits.

Today, financial literacy is required for all directors serving on audit committees of companies listed on major stock exchanges.

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