The Board’s Corporate Governance Role

Legally boards are required to ensure that an organization is able to fulfill its mission, has a solid strategic plan and https://howtoadvertiseyourblog.com/title-cut-costs-with-smart-data-room-tariffs/ doesn’t get into financial or legal problems. However, how boards take on these responsibilities can vary dramatically and is dependent on the specific circumstances of the company.

A common error is that boards get too involved in operational aspects which should be left to management, or that they aren’t aware of their own legal liability for the decisions they take and the actions they make on behalf of the organization. This confusion is usually caused by not being able to keep up with the changing demands placed on boards or from unanticipated issues like unexpected financial crises and staff resignations. This is typically resolved by taking time to discuss the challenges facing directors and providing them with a simple set of documents and orientation.

Another common mistake is that the board is able to delegate its authority and chooses not to look into the matters it has delegated (except for the tiniest of NPOs). In this scenario the board loses its evaluation function and cannot assess whether the operational activities contribute to a satisfactory performance of the company.

The board should also develop a governance system that outlines how it will work with the general manager or chief executive officer. This includes determining how the board will meet regularly, how members will be selected or removed and how decisions will be made. The board also needs to develop information systems that offer valid information about its past and future performance to support its decision-making.