The Board’s Corporate Governance Role

Boards have a legal requirement to exercise due diligence to ensure that an organization achieves its goal and has a sound strategic plan, and doesn’t become involved in legal or financial issues. The way boards take on these responsibilities is different and highly dependent on the circumstances.

Boards frequently make the mistake of becoming too involved in operational issues that should be left to management or are unclear about their legal responsibilities for the actions and decisions taken on behalf of an organisation. This confusion is often caused by a failure to keep up with the changing demands on boards or unanticipated issues such as financial crisis and resignations of staff. It is often solved by taking the time to discuss the challenges facing directors and supplying them with a simple set of documents and orientation.

Another mistake that is common is that the board over-delegates its power and chooses not to look into those matters that it has delegated (except in the most small of NPOs). In this scenario the board loses the assessment function and cannot determine whether the activities of the organization contribute to a satisfactory performance of the organization.

The board must also establish a governance system including how it interacts with the general manager or CEO. This includes the determination of the frequency of meetings and how members will be selected and removed, as well as how decisions will be made. The board should also develop information systems that offer valid data on its past and projected performance in order to assist in making its decisions.

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