The board’s job is to provide direction and oversee the executive management team. It makes sure that company policies are implemented and that all fiduciary obligations are fulfilled. While some boards grant too much authority to their executive leadership however, the majority do not take their responsibilities to the fullest extent. Sadly, the media abounds with stories of business failures that are caused by poor or incompetent management teams.
To prevent such disasters from happening It is essential to ensure that your board is comprised of a wide range of perspectives and abilities. It must also function effectively as a team. This is why you should establish specific management guidelines for your board including welcoming diversity into your board and taking on leadership roles, fostering an agile structure (e.g. creating committees to address new risks) and ensuring ongoing review of the board as a whole and individuals.
Another principle of board management is to avoid getting involved in operational issues, especially when it comes to the day-to-day activities of your business. This is because a significant portion of the role of a company’s board is to create a long-term direction for your business and how it will fit to the larger society.
Although it might sound like a straightforward idea, many businesses struggle with this concept. For instance the board members may begin meeting with management directly without consulting the CEO or take a leap of faith in an effort to be helpful. This can put the CEO in a difficult position. The CEO must work with the chairman of the board and other directors to solve the issue and restore trust.
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