A board of directors is elected or hired by shareholders, principals or owners to govern and manage the affairs of an organization. The functions of a board of directors are set forth in the organization’s charter, bylaws and state statute. All public corporations are required by law to appoint a board of directors. A board of directors oversee, audit, direct strategic planning, delegate authority to the management team and control the financial well-being of the organization The board of directors has a fiduciary duty to act in the best interest of the organization.
A Board Oversees the Organization:
The shareholders or owners of an organization should select board members based on their ability to oversee the organizations core functions. The ability to oversee the organization is determined by the qualifications and experience of the prospective board members as determined by the organizations bylaws and charter. The ability to oversee an organization requires a variety of skills, education and ethical standards which is dependant on the personality of the organization. The ability to oversee an organization created for the purpose of selling flowers or selling auto parts require different skill sets.
A Board Audits Financial Conditions: :
A board of directors is required to audit the financial transactions and overall financial health of an organization. The board oversees and audits the management team’s record keeping regarding the every day operations of the organization. The board delegates authority to the management team to conduct business on behalf of the organization. The Sarbanes-Oxley Act of 2002 requires all public boards must have an independent audit committee made up of outside directors who are charged with the responsibility of supervising financial reporting.
A Board Delegates Authority:
A board of directors delegate authority to act for the organization to the management team. The board may hire, fire and describe the duties and responsbilities of the management team. The board of directors is in control over all management decisions, but delegates its authority to carry on the every day obligations of the organization to the board.
A Board Directs Strategy:
The board of directors is charged with the responsibility of determining a strategic plan for maintaining and enhancing the well being of the organization. The board formulates plans for expansion, acquisitions, approves mergers and anticipates economic conditions which affect the organization.
A Board Has A Fiduciary Relationship:
The board of directors owes an absolute duty of care to the organization. The board has a fiduciary relationship to act in the best interest of shareholders, owners and the organization. An outline of board of directors functions should clearly delineate the length of service, causes for discharge and specific conduct required by the organization in order to serve on the board.
Define the Role:
A board of directors typically has a Chairman, Co-Chair, Secretary, Treasurer and a Finance/Audit Committee. An outline of the board’s function should include job descritptions of all executive board members and a general description of a board member.
A Board Officiates Meetings:
The board of directors officiate at periodic shareholders meetings and other organization meetings. The board sets the means and process of conducting meetings. The board may adopt the Official Robert’s Rules of Order or develop an alternative means to organize the conduct of meetings.
Board of Directors Independence:
A board of directors should reflect a wide-range of key qualifications, expertise and abilities central to the overall mission and purpose of the organization. Board members should feel free to provide their duties of advice and consent without fear of reprisal. Specifically, an organization does not benefit from a board of directors that operates as a rubber stamp for management decisions.
Keep in mind, The Free Management website and other free legal websites are general in nature and do not reflect specific legal requirements for the state in which the organization is registered. It is always advisable to seek legal counsel from the state in which the organization is registered or incorporated for local requirements.