The Board's Corporate Governance Role

Legally boards are required by law to ensure that an organization achieves their mission and has a sound plan of action and doesn't fall into legal or financial issues. However, the method creating synergy between data and business objectives by which the boards participate in these responsibilities can vary dramatically and is largely dependent on the specific circumstances of the company.

Boards often make the mistake of becoming too involved with operational issues that should be left to management or they are unclear regarding their legal responsibility for decisions and actions taken on behalf of the company. This confusion is usually caused by not keeping up with changing demands placed on boards or from unanticipated challenges such as sudden financial crisis or staff departures. Usually, this can be addressed by allowing for discussions about the challenges facing directors and giving them an orientation and simple written material.

Another common error is when the board is able to delegate its authority and decides not to review the issues it has delegated (except for the tiniest of NPOs). In this case the board is unable to perform its evaluation function and cannot assess whether the operational activities contribute to the satisfactory performance of the company.

The board also needs to develop an effective governance system, including how it will interact with the general manager or CEO. This includes determining how the board will be scheduled to meet regularly, how members will be chosen and removed, and the manner in which the decisions will be made. The board must also create information systems that can provide valid data on its past and projected performance to help in its decision-making.

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