The Board’s Corporate Governance Role

Boards are required by law to exercise due diligence in ensuring that the company is able to achieve its goal, has a sound strategy and doesn’t run into legal or financial difficulties. However, the way boards get involved in the responsibilities of these boards can be very different and is dependent on the particular circumstances of the company.

Boards often make the error of becoming too involved in operational issues which should be left to management or they are unclear about their legal liability for the actions and decisions taken on behalf of an organisation. This confusion is usually caused by not being able to keep up with the evolving demands on boards, or from unanticipated issues such as unexpected financial crises and staff resignations. Usually, this can be remedied by taking time for discussion on the challenges faced by directors, and by providing them with orientation and simple written materials.

Another common error is when the board chooses to delegate too much authority and not examine the matters it has given to others. (Except for the tiniest NPOs). In this case the board loses its evaluation function and not determine if these operational activities contribute to a satisfactory performance of the entire organization.

The board should also create a governance system including how it interacts with the general manager or CEO. This includes determining how the board will meet regularly, the manner in which its members will be chosen and removed, and how the board will make its decisions. The board should also develop information systems that are able to provide accurate information on the past and future performance to aid in making decisions.

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