What Is A Board Member Agreement?

A board member agreement is a contract that establishes the responsibilities and entitlements of its directors. By signing this contract, each board member agrees to follow the company’s byelaws and policies. 

Board member agreements are a crucial element of the orientation of new members and help to increase the accountability of the board.

What is included in a board member agreement?

Here are the key components of a board member agreement:

• Details of the organisation and its values

This section summarises the core values of the organisation. It should highlight the overall mission and goals of the company. Each director must understand and commit to the company’s purpose.

• Information on the current board

The section includes a list of the serving board members and their roles and duties within the company.

• Board member’s responsibilities

The board member’s fiscal, legal and moral responsibilities to the company should be emphasised. This section highlights their duty to uphold these responsibilities and the expectations of the organisation, including board meeting attendance.

• Aspects of tenure

This section details the nature of the board member’s tenure, including the length of their term, the sum of money the company will pay and any expenses they are entitled to receive, as well as bonuses and share options.

• Termination and resignation policies

Resignation policies highlight the procedures to be followed if the board member decides to step down from their post. It also outlines events that could lead to termination and the process followed, including the terms of payment and access to company materials.

• Conflict of interest policy

A conflict of interest policy emphasises the member’s responsibility to inform the board in case of conflicting interests. It should also stress the importance of staying away from activities that can lead to a conflict of interest with the organisation.

Who creates the agreement?

The board secretary typically drafts the board member agreement, keeping in mind the organisation’s byelaws. Serving directors and the board chair can give their input on the draft to ensure that the final document is comprehensive, informative and aligned with the company’s regulations, procedures and values.

Importance of confidentiality in a board member agreement

Confidentiality is a major factor in a board member agreement. Directors must maintain the privacy of the sensitive information of the company, board, staff members and clients. The document should include what constitutes confidential information, the director’s obligations regarding maintaining privacy and a promise to uphold it.