Boards of directors have three formal responsibilities all members are required to comply with. Duty of Care – Board members are legally obligated to act in the best interest of the company, and make decisions that keep the mission of the business at the forefront. Duty of Loyalty – Every member is required to put aside their personal and professional interests when making decisions on behalf of the company. Obligation – Each member is legally bound to ensure that their organization is in compliance with all applicable laws and adheres to the standards of good governance.
Boards of directors are entrusted with more complicated duties than these three. These responsibilities vary based on the requirements of each organization. For example when your company is a publicly traded corporation is likely that a major part of your board’s responsibilities is overseeing the CEO and making sure the financial statements are correct. If you’re a young company within your business your board could be focused more on setting goals for strategic objectives and determining the direction of your business.
A board’s role also involves ensuring a proper balance in the management of risk. Your board may be required to intervene in a crisis that may harm the image of your company even if they’re not legally or ethically responsible. Boards must also ensure that their members are aware about the risks of being on their board, and are prepared to deal with these risks effectively.
Each board member plays a unique and important role in helping your business succeed. For this reason, it’s important to have a clear understanding of the roles and responsibilities of your board members and how they are connected to your company’s strategic goals. Aprio’s Board Portal software for instance will help you simplify your duties and manage meetings efficiently.