Board Governance Facts

Boards have 3 primary roles – to establish policies, to take important and strategic decisions, and to supervise the activities of their organization. A well-written policy can help a board concentrate its efforts, prevent repetition of efforts and help maintain the vital (but often thin) distinction between oversight and management activity.

Effective boards must be able of identifying and addressing evolving mission-critical concerns. This requires having full access to the most complete and accurate information available. The information could include comprehensive reports on expenditures and budgets as well as financial statements as well as annual and quarterly performance results and narrative reports on internal and external operations, and more. It’s important for a board to understand and be able to communicate the narrative told by these reports.

Board members must be able to discuss difficult and controversial matters, even if it creates tension within the group. It’s important for directors to have the freedom to challenge one another and play a variety of roles on the board – the ruthless cost cutter, the damn-the-details big picture guy, or the split-the-differences peacemaker. Directors can gain a better understanding of the options that are at their disposal by playing various roles.

Research suggests that although it is commonly believed that the best board members possess a high level of personal commitment to their company, this is not the case. The boards of both failed companies and highly admired corporations, for example, had roughly the exact same proportion of outsiders. The key appears to be the process of the company’s strategy and risks, and the quality of communication.