The following information has been gleaned from an Internet Search: "Board of Directors Rules and Responsibilities" ~
Other Duties
- Directors perform
a variety of critical tasks for a corporation. They develop long-term
strategies for the company and appoint high-level management, like the CFO
and CEO.
Directors are also directly accountable
to the shareholders and must accurately update them with information regarding
the company's financial integrity and forecasts.
Directors must review and approve of the
corporation's annual budget and the performance of top-tier management
Duty of Good Faith
- The Duty of Good
Faith requires directors to conduct themselves with honesty and fairness
toward the shareholders at all times. This duty prohibits a director from
acting in a way that benefits an individual or select group of
shareholders over the others. This duty mandates that directors do not
withhold critical information from the shareholders, even if that
information may decrease any chances of re-elected.
Major Duties of Board
of Directors
Brenda Hanlon, in In Boards We Trust,
suggests the following duties (as slightly modified by Carter McNamara to be
"nonprofit/for-profit neutral").
1. Provide continuity for the organization
by setting up a corporation or legal existence, and to represent the
organization's point of view through interpretation of its products and
services, and advocacy for them
2. Select and appoint a chief executive to whom responsibility for the
administration of the organization is delegated, including:
- to review and evaluate his/her performance
regularly on the basis of a specific job description, including executive
relations with the board, leadership in the organization, in
product/service/program planning and implementation, and in management of the
organization and its personnel
- to offer administrative guidance and
determine whether to retain or dismiss the executive
3. Govern the organization by broad policies and objectives, formulated
and agreed upon by the chief executive and employees, including to assign
priorities and ensure the organization's capacity to carry out
products/services/programs by continually reviewing its work
4. Acquire sufficient resources for the organization's operations and to
finance the products/services/programs adequately
5. Account to the stockholders (in the case of a for-profit) or public (in
the case of a nonprofit) for the products and services of the organization and
expenditures of its funds, including:
- to provide for fiscal accountability,
approve the budget, and formulate policies related to contracts from public or
private resources
BoardSource, in their booklet "Ten
Basic Responsibilities of Nonprofit Boards", itemize the following 10
responsibilities for nonprofit boards. (However, these responsibilities are
also relevant to for-profit boards.)
1. Determine the Organization's Mission and
Purpose
2. Select the Executive
3. Support the Executive and Review His or
Her Performance
4. Ensure Effective Organizational Planning
5. Ensure Adequate Resources
6. Manage Resources Effectively
7. Determine and Monitor the Organization's
Products, Services and Programs
8. Enhance the Organization's Public Image
9. Serve as a Court of Appeal
10. Assess Its Own Performance
However, the Board should not run a company. That is the role of the CEO and his/her senior management team. The Board's job is to make sure the right team is at the helm, not to be at the helm themselves. Boards that meddle, that get too involved, that undermine the management team are hurting the company, not helping the company.
Boards work for the company. The company is their responsibility. They must always act in the best interests of the company and its major stakeholders; the employees, the customers, the shareholders, the debtholders, and everyone else that is relying on the company to deliver on its promises.
Some would say that the company works for the Board. But I think that is wrong. The company works for the market (and I am using the word market in all of its meanings) and the Board and the management team work for the company. Every director must put the interests of the company first and their interests second. This is called fiduciary responsibility.
