The Role of the Board of Directors as a Whole
The ultimate responsibility of the modern corporate director, individually and as part of the whole board, is the protection and growth of long-term shareholder value. There are several things directors must do to fulfill their responsibilities.
Directors Must Understand How Corporations Work
The Board as a group has great powers, like appointing or removing executives and officers. One director may have little power or great influence, but in all cases directors have real accountability. Board actions are for the benefit of others – generally shareholders – and directors are judged on their actions for others. Directors must learn, over time, how corporations operate in general and they have a duty to be diligent in learning the unique aspects of how the company they serve as a director operates.
Directors Must Know What Acts to Avoid
Directors avoid gross negligence. In exercising their basic duties, directors do everything with a high standard of performance. More importantly, they attend to the basics of showing up to perform their duties, coming prepared for their work as directors, investing the time and energy required to properly handle their work, and exercising diligence in all they do. These actions will all help avoid charges of, or acts of, gross negligence.
Directors avoid conflicts of interest with the company they serve. They avoid competing directly or indirectly with the company they serve, and they avoid seizing corporate opportunities that belong to the company. They make themselves aware of any potential conflicts of interest with the company and immediately disclose even the hint of a conflict of interest, letting others review any potential conflicts to determine their propriety. Directors learn over their terms of service to avoid and properly manage other key areas of risk like properly addressing insider stock trading.
Directors Must Know Their Basic Responsibilities as Directors and Board Members
In exercising the duty of care, directors must be diligent and deliberate in handling all corporation matters. In exercising the duty of loyalty, directors must look after the interest of the stockholders, the company, and the many other stakeholders of the company including employees and customers. Directors must be aware of the handful of additional duties and standards in performing their duties like: the duty of candor in communicating for the company, the duty of confidentiality with boardroom deliberations, and the duty to disclose any conflicts or adverse interests they have with the company.
Directors Must Blend Diverse Attributes as a Cohesive Group Overseeing Management
Directors individually bring diverse attributes and experiences into the boardroom. Collectively, a board must come together as a cohesive group that works well together.
Developing High Performing Boards: Seeking New Talent and Lessons Learned on Great Boards
When it comes time to add a new director or trustee to your college, university, or foundation board, what do you look for? Numerous trends today are prompting organizations to formally seek and add new board members at a record pace.
Just a few of these trends are:
- Growth in assets;
- Demand for talent;
- Growth in complexity;
- Maturing organizations;
- Needs for independence;
- Term limit requirements;
- Good governance trends;
- Generational changes and transitions.