The board’s role is to provide guidance and oversee the executive management team. It ensures that company policies are implemented and that all fiduciary obligations are fulfilled. Some boards grant too much power to executive leadership. Most don’t. Sadly, the media abounds with stories of business failures caused by corrupt or incompetent management teams.
One of the most effective ways to prevent such disasters is to ensure that your board members have a broad range of expertise and perspectives and works well together as a whole. This requires establishing rules of management for the board like embracing different perspectives and assuming the leadership roles, as well as fostering an flexible structure (e.g. forming committees for new risk areas), and engaging in continuous assessment of the board and individual members.
Another board management principle is to avoid getting involved in operational issues, particularly when it comes to the day-today activities of your business. The main role of a board is to set the long-term goals of your business and its place in the world.
This may appear to be a no brainer however, many companies are struggling to implement this idea. Certain board members, for instance, start direct meetings with the management, without the CEO’s knowledge. They also make quick decisions to be useful. This can put the CEO in a tough position. The ideal scenario is for the CEO to work with the chair of the board and other directors in resolving this issue and establish trust again.
