The Role of Board of Directors in Corporate Governance
Ultimately, the role of board of directors in corporate governance is insuring that the assets are protected in the interests of the shareholders or stakeholders they represent. Failure to do so is the source for the scandals, lawsuits and criminal charges that now dot the corporate landscape.
For non profit organizations and boards of directors, the role is the same. There are assets, stakeholders, customers, standards, laws, regulations—all of which must be protected or adhered to.
What are the responsibilities/tasks that boards must perform to meet this challenge? They include:
- Get organized: How many members? How
many meetings? What committees? What is their role/authority?
When and by what method will we fulfill our board responsibilities
in planning? How do we hear from shareholder/stakeholders?
- Represent: The role of board of directors
in corporate governance includes understanding the concerns and
questions of shareholder and key stakeholders and assuring they are
addressed objectively;
- Set direction: Purpose, vision, values, priorities,
growth strategy, improvement strategy, budgets;
- Protect assets: Prudent use of assets, proper
levels of risk, fund raising, public relations, risk-management programs/policy;
- Monitor and evaluate performance: Are we on
plan, on budget, are key performance indicators known, are our strategies
working as intended, are we correcting problems/improving performance?
- Establish ground rules: Personnel policies,
authorities of CEO, policies governing board activities, protection
of assets, performance standards for CEO, policies on evaluating investments,
desired end results, evaluation of organizational performance;
- Provide leadership: Select, evaluate, support for CEO. Succession planning to minimize disruption of momentum.
Taken together, these responsibilities comprise the role of
the board of directors in corporate governance. These responsibilities
are the same in nature for non profit organizations and boards of directors.
Only the content and measures/standards for success differ.
Involvement in each of these responsibilities varies based on the level of expertise, experience and level of responsibility taken by the board. At a minimum, the board assures that these are done well (fiduciary role).
Next, the board may assume responsibility to create, contribute to or even control (vs. bless) direction and strategy (strategic role).
Ultimately, the most competent, experienced and responsible of boards become almost day to day partners with management in development of strategy, evaluation, problem identification and solution (added value role).
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