Welcome to the NED Capital Podcast, where we explore the issues that matter to chairs, CEOs, investors and business owners when building effective boards.Today, we're looking at one of the foundations of a successful board:Corporate governance.Corporate governance can sound like a dry or highly technical subject, but in reality it is about something very straightforward: how an organisation is directed, controlled and held accountable.Good corporate governance helps establish who makes decisions, how those decisions are challenged, how risks are managed and how the interests of shareholders and other stakeholders are considered.For companies of any significant size, governance becomes increasingly important as the organisation grows more complex.We've produced a full guide to corporate governance that explores the subject in more detail, but there are several principles that every board should understand.The first is accountability.A board needs clear responsibility for the organisation's direction and performance. Directors need to understand their duties, the decisions they are responsible for and the information they require to make those decisions effectively.The second is transparency.Boards need reliable information. Directors cannot provide effective oversight if they receive incomplete, inaccurate or excessively filtered information.The third is challenge.A strong board should not simply approve whatever management proposes.Constructive challenge is one of the most valuable functions of a board.That is where Non-Executive Directors can play a particularly important role.Because NEDs are not responsible for the day-to-day running of the organisation, they can bring a degree of independence and objectivity to board discussions.But having NEDs on a board doesn't automatically create good governance.The structure and composition of the board matter enormously.We've also produced a detailed guide to Board Structure, Composition and Independence, which looks specifically at these issues.So what makes an effective board structure?Start with balance.A board should collectively contain the skills and experience required to oversee the organisation.That might include financial expertise, sector knowledge, operational experience, technology expertise, regulatory understanding, international experience or specific knowledge of mergers and acquisitions.But it isn't simply about collecting as many skills as possible.The board needs the right combination.Imagine a business with five directors who have almost identical backgrounds.They may all be highly experienced, but if they have similar professional histories, similar networks and similar assumptions about the business, the board may lack diversity of thought.Sometimes the most valuable director is the person who asks the uncomfortable question that everyone else has overlooked.This is one reason independence matters.An independent NED should be able to challenge management without being unduly influenced by personal relationships, previous involvement with the company or other interests.Independence provides an additional layer of objective scrutiny.But independence isn't the same as being disconnected.The best NEDs understand the business sufficiently well to challenge intelligently.They don't simply oppose management for the sake of it.Instead, they ask questions such as:“Why are we making this assumption?”“What happens if that forecast is wrong?”“Have we considered the downside?”“What evidence supp