With constant changes in the business environment, your board of directors must be able to respond to crises and changes within and outside of the organization. Unfortunately, many boards are unsure of what their position is, don’t understand the duties of the board or are unmotivated to make changes. This can cause loss of public confidence, a drop in sales, and at times, fines.
To avoid additional crises, your board should contain a diverse governing body. Those individuals must be able to perform conflict management and be willing to purge programs which are outdated or in need of overhauling. These 10 legal tips can help any board.
Anyone who accepts the position on the board must accept all responsibility–good and bad. Boards have responsibilities to the organization, employees and the public, and when those responsibilities are not taken seriously or affect the organization negatively, board members are held responsible.
While the board can delegate tasks to committees, staff and outsourced contractors, those tasks should still be monitored. Each board should have a policy and procedure manual that dictates how oversight mechanisms should function.
While there is a certain prestige of being on the executive board or the chair, that does not mean that those positions cannot be held accountable. The executive board usually acts on behalf of the board when the full board is not in session. All actions must be reviewed and approved by the full board. A chair’s duty is to preside over meetings and act as a liaison between the board and the chief executive.
A board of director’s duties is to guide and direct the organization but not the day to day duties of staff. Board members who micromanage staff are undermining the chief executive’s position. While there can be some blurring of the lines in small organizations, staff should not ask the board to take on daily tasks.
In every organization, conflicts will occur. Whether there are personal or professional differences, there has to be some way of minimizing risks. Alternative arrangements and on how to conduct conflict management is necessary for all organizations.
Depending on if your organization is a not-for-profit, your governing body may need to review laws on tax-exemptions. Tax rules for nonprofits are more strict than for-profit organizations. All legal requirements must be followed.
Organizations change focus, direction and even classification, but often, the governing documents do not change. Over time, this leads to outdated, conflicting and out of compliance laws. Reviewing the governing documents–including bylaws and policy and procedure manuals should happen yearly.
As the organization changes, the board must re-educate its members and motivate them to perform their duties. Many board members are unaware of the actions of the organizations or are unaware of their duties. Basic yearly orientations, educational opportunities and guest speakers can revive the passion of your members.
Documentation of board meetings can be difficult. Board minutes can open up the board to liability issues if all discussions are recorded; however, just documenting actions can confuse later members as to the reasoning behind the decision. Find the middle ground and stick with it.
All programs should be reviewed regularly. The reviews should look at effectiveness, financial oversight, and staff responsibilities. If a program is outdated and no longer provides gains, it can be cut, leaving room for newer programs.
Proper corporation governance is a key consideration for the smooth operation of company operations, to minimize company and personal liability and to help facilitate an exit event such as a company sale or public offering. Douglas Park Law regularly counsels members of the board of directors and the board as a whole on a variety of corporate governance issues that confront companies and their leadership. Contact us today at for a free consultation.