Whether you’re a brand new director or filling a position in a new business, there are plenty of roles and responsibilities to get to grips with. Even with the best succession planning possible, filling a previous board member’s shoes can feel overwhelming and daunting.
In essence, each board member and the board of directors as a whole have a range of fiduciary duties (or legal duties) to fill. The primary role of a board is to push a business toward its goals. Having these duties outlined and agreed upon helps ensure that members act with the best interests of the company and its shareholders in mind. It also sets the expectations for board members.
Common board fiduciary duties include:
- A duty of care
- A duty of loyalty
- A duty to act within the law
- A duty to act in good faith
We’ll take a more in-depth look at each of these further down in this article.
So, how can you ensure that you’re fulfilling your role and making a good impression? A board roles and responsibilities checklist could help. Let’s explore this…
What is a board roles and responsibilities checklist?
Contrary to popular belief, a checklist isn’t quite the same as a to-do list. A checklist exists to support regular and recurring processes and tasks.
Often in board positions, a checklist can’t be “ticked off” as done, as the responsibilities are ongoing throughout your period as a board member. This checklist can help you to understand the role of board members as well as the basic responsibilities of board members.
The main duties of a board member
1. Duty of Care
A duty of care ensures that each board member acts with good business judgment and care when suggesting, making or voting on improvements. This includes due diligence, using expertise to balance the pros and cons of a potential change and acting as a “reasonable person” would in their situation.
2. Duty of Loyalty
The duty of loyalty is two-fold. First of all, it’s about acting in the best interests of the company itself, not for them as the board member. Beyond that, it’s a duty of loyalty to the company itself which means exercising confidentiality, not advising competitor companies and disclosing potential conflicts of interest.
3. Duty of Obedience
The duty of obedience is also around acting within the law. This duty requires a very strong understanding of any laws, regulations and by-laws (both regional and national) that apply to the business and its activities. This duty is also known as corporate or board governance.
4. Duty of Good Faith
Some businesses stick to three fundamental fiduciary responsibilities as the duty of good faith is mainly covered in the other three duties. This encompasses acting in the best interests of the business and not themselves, being loyal to the company, disclosing conflicts and abiding by the laws and regulations that apply.
Board roles and responsibilities checklist
Feel free to bookmark, share and save this checklist as a regular reminder of a board member’s role and responsibilities.
|Get to grips with the role of each director on the board||This should be one of the first items to understand. Who is who, who is responsible for what, who is the chief executive, who is the board chair? The answer to these questions should be met in your orientation process alongside information on board member roles.|
|Understand expectations||You’ll want to quickly understand what the key responsibilities are for your role. This includes what the other directors, stakeholders and shareholders expect from your position and expertise. It may include regular reporting or being an authority on one aspect of the business. As well as this, you’ll need to understand the annual calendar of the board and the regularity of meetings, as well as the expectations for attendance.|
|Oversee operations and finances||Operations and financial reporting are critical to the success of a board. You’ll need to understand what the key metrics and KPIs for regular reporting are and help improve these as needed. Financial responsibilities|
|Understand the business goals, vision and values||A thorough understanding of the company’s goals is key. This applies to for-profit and nonprofit boards equally. It’s your responsibility to balance the achievement of company goals with the ethics and values of the brand.|
|Learn about the corporate culture||Corporate culture is defined as the beliefs, behaviours, ethics and attitudes that characterise an organisation and influence its practices. Understanding the culture of the business as a whole is critical for success, particularly as it’s driven from the top-down of a business. Acting in concert with the corporate culture is one of the keys to board success.|
|Contribute to strategic planning||Building a strategic plan is a core element of board activity. This may include SWOT analyses which will help the leaders to understand the Strengths, Weaknesses, Opportunities and Threats of any potential decision or vote. To contribute to the strategic planning process, a board member should have performed their due diligence.|
|Participate actively in corporate governance||It’s important to get to grips with all of the relevant laws, rules, regulations and by-laws that apply to the board, the business and the company activity. It’s equally important to understand the inner workings, processes and practices of the board so you can quickly integrate yourself into their way of working.|
|Contribute to risk management and mitigation||Some boards will have dedicated risk management individuals or teams in place. However, this function should still report to the board. The entire board should be aligned with the potential risks and drawbacks of any idea or strategy that is put forward for a vote.|
How do the board of directors make decisions?
Each board meeting will have a meeting agenda supplied to the board in advance. This document outlines the main discussion items ordered by priority from the most important topics early on in the meeting to the less important topics later on. A strict agenda keeps the board from distractions during a meeting. Each report or potential decision will have a set of notes and data attached to allow the board to understand why this proposal or idea has been put forward, what it involves, the benefits, potential drawbacks and risks it presents.
Then, the board will take a vote for and against the proposal which will usually take the form of a motion. For example, “I move that we re-assign €10,000 from the operations budget to the marketing team for TV advertisement”. If the motion is voted against, the proposal will not go ahead (or may need remodelling for re-presentation). If the motion is voted for by the board, it’s then accepted and can be put into practice. In the majority of situations, a majority vote is required to pass or deny a motion.
What is corporate governance?
Corporate governance is focused on driving ethical and legal behaviour. The board of directors is responsible for the corporate governance of a business. Good corporate governance takes into account laws, regulations and by-laws that apply to a business as well as any economical, social or market conditions. All board governance decisions should also be made with the impact of staff, customers, clients, suppliers, communities, partners, stakeholders and shareholders in mind.
What is the function of a non-profit board?
In some ways, a nonprofit board works differently than a for-profit board. The nonprofit sector is primarily focused on driving adequate resources and sourcing extra funds for operational fulfilment. Nonprofit organisations are also often led by trustees who are volunteers, rather than directors who may have financial ownership or stake in the business.
However, whether the board is a nonprofit or for-profit business, both are responsible for supervising the CEO, the top-level management of the operations, the financial performance of the business and corporate governance.
To summarise, a board roles and responsibilities checklist can help a new director get to grips with their first few meetings and the function of the board. The tasks shouldn’t be ticked off, they should form an ongoing part of their position as a director.
If you want to increase your board’s productivity even further, iBabs can help. This board portal allows you to take personal control of your meetings, collaborate successfully and securely access the most up-to-date meeting minutes, notes, reports and documents at any time, no matter where you are. Book a free demo of iBabs Board Management Software today.