The Board’s Corporate Governance Role
Legally boards are required by law to ensure that the organization is able to fulfill its mission and has a well-thought-out strategy and doesn’t get into financial or legal problems. However, the method by which boards take on the exercise of their duties can differ dramatically and is largely dependent on the situation of the business.
Boards often commit the blunders of becoming too involved in operational issues that should be left to management or they are unclear about their legal liability for decisions and actions made on behalf of an organisation. This confusion often results from not keeping up with ever-changing demands placed on boards, or from unanticipated issues like unexpected staff resignations and financial crises. This can usually be resolved by taking the time to discuss the issues facing directors and providing them with simple written materials and an orientation.
Another common error occurs when the board is able to delegate too much power and not be able to review the issues it has given to others. (Except for the tiniest NPOs). In this scenario the board is unable to perform its evaluation function and is unable to determine whether the operational activities are contributing to the satisfactory performance of the company.
The board also needs to develop an organizational structure for governance, including how it will interact with the general manager or CEO. This includes setting the frequency of board meetings and how board members will be selected and removed, as well as the manner in which decisions are made. The board also needs to develop information systems that can provide information on the past and future performance to help them make decisions.
