How to set up a proper Board
What does the term “Board” mean in the corporate context?
Simply put, a board is what you make it. The composition of a board is usually determined by the governance structure of an entity. This is usually predetermined by the constitution of the entity. An entity in this context may be a private company, a non-profit organization or a school. The founders of such entities will put in place their governance systems at the point of establishing the organization. Therefore, a board is what the founders of an organization decide it is. Normally, it will consist of directors, elected by a larger group of members of the entity, who have an interest in its wellbeing. These can be categorized as shareholders for private companies and the general assembly for non-profit organizations.
What next, once a board has been constituted?
The members of the newly constituted board have the duty to set down their mandate. The law suggests that directors should set down their own rules of procedure, against the standard set by the law. However, this is subject to what is provided for in the constitution of the entity. It is therefore important that founders take a keen interest in the incorporating documents of their entity, especially those that bind them such as the constitution or what may be referred to as the Articles of Association for private companies.
What are the duties of a board?
The Board is the management arm of any organization, therefore, they have an overall duty of providing strategic guidance and monitoring to the entity. This might involve overseeing financial plans, policy making,
company performance as well as risk management. While carrying out these roles, each member of the board has a fiduciary duty of care which requires them to have the entity’s best interests at the centre of all decisions. As a result, board members are always required to make decisions independently and with objectivity. It is also highly encouraged, for the sake of a company or organization’s wellbeing; to always have non-executive members on their board. These may also be referred to as independent directors for reasons that they have no interest, financial or otherwise, are brought on for their expertise advice and are rarely on the payroll.
What then can be considered as proper practice in a boardroom?
When it comes to meetings, proper practice dictates that the secretary sends out prior notice of at least twenty-one days, accompanied with the minutes of the previous meeting for adoption as well as a clear agenda and time schedule. This enables directors to make decisions in the meeting from an informed perspective.
While in the meeting rules of proper etiquette also apply such as:
- Not talking without the chairperson’s recognition
- Not talking over others
- Putting one’s phone away; and
- Not leaving a mess
If these simple rules are applied in a board room, the director’s job becomes a whole lot easier.