Board Basics: What are the Roles and Responsibilities of Board Members?

Board members play an important role in building a successful organization. They incorporate the representation of shareholders’ interests. These people are the ones responsible for establishing the direction of the company, which includes achieving effective board governance, strategizing, and being accountable for anything that’s bound to happen to the business. Board members are the fiduciaries of the corporation, thus they are also responsible for keeping the company ethical and sustainable.  

But how do you classify an efficient board member? In this article, understand the board members’ responsibilities and recognize their roles in making corporate decisions.

What are the board members’ duties?

The role of board members in service does not end with the accomplishment of one or two of the company’s goals. They are legally bound by three primary duties:

• Duty of care – As a board member, it is their responsibility to safeguard all the company’s assets — facilities, people, and tangible resources. An effective board member recognizes that maintaining these assets results in a functional organization. For example, providing advanced tools and technology to employees may result in increased productivity.
• Duty of Loyalty  – Loyalty is essential in any organization. Having devoted board members protects the company’s interests. And, as members of the boards, it is their responsibility to identify and resolve all conflicts of interest, as well as to develop policies to prevent them.
• Duty of Obedience – Every corporation has its own set of bylaws. As a board member, you must set a good example for your colleagues. Complying with your bylaws and the surrounding regulations indicates that your company takes obedience seriously. 

What are the major responsibilities of board members?

Having exemplary leadership and mindset makes your company successful, thus board members must work their way to be as efficient as they can. As leaders, board members have their own fair share of deliverables to steer the company toward the shareholder’s interests. Aside from their legal responsibilities, board members are also responsible for:

Complying with fiduciary and legal responsibilities

As mentioned above, board directors have the duty of care. It means that board members must serve the corporation or nonprofit organization in the best possible way they can. They have a legal obligation to lead the company toward its mission and vision. 

Second, board members are legally obligated to serve their stakeholders with loyalty. Directors must serve in good faith and forget all their personal interests for the sake of the organization. 

Finally, their members must understand obedience completely. When making decisions, the bylaws, articles of incorporation, and government regulations should guide board members. 

Because members have legal obligations, they must carry them out with extreme caution when strategizing and making decisions. Failure to meet these responsibilities may cause a lawsuit and penalties if negligence is proven.

 Selecting and Managing the CEO

A director’s role includes hiring and selecting the best CEO talent available. They must set the standards based on their strategic needs, and they must handpick the person who will best fit the company’s mission and vision.

More importantly, their selection implies assessing and monitoring performance and providing them with the resources they require.

Setting Compensation levels

Compensation is important for businesses because it serves as payment and reward for employees performing their duties. A compensation committee must be formed as part of the board member’s responsibilities. This committee’s primary responsibility is to assess the current compensation offered by the company to its employees and to the boards. 

Planning for short-term and long-term strategies

The difference between short-term planning and long-term planning is that short-term strategies help evaluate the progress in the present and then make a plan to improve it. On the other hand, long-term strategic planning requires a huge amount of time in order for the company to achieve it. An example of long-term strategic planning is to increase brand awareness of your brand. 

Assessing Board Performance 

Board evaluation is essential for good governance. Assessing board performance allows you to identify areas where the board can improve. There are numerous approaches to evaluating board performance. It can be as simple as surveys or as extensive as being evaluated by a third party. 

Board assessment will assist board directors in identifying their strengths and weaknesses. As a result, they can improve not only their weaknesses but also their strengths.

Attending Board Meetings 

Meetings are essential, as it serves as a forum for board members to interact with one another. This is where important topics such as strategic planning, financial budgets, project proposals, and approval of resolutions, are discussed. Constant absences may cause delayed decisions, ultimately affecting governance and the goals of the company.

To avoid board member absenteeism, secretaries must be able to schedule it ahead of time. They must notify participants about the agendas and send them on time to prepare for the meetings. 

Recruiting New Members

Board members are the strategic leaders of an organization. As a result, board members must select and train their successors with care. They must first understand the required competence and experience in order to serve the company, Board members may need to prepare for performance evaluations and board elections.

What are the major positions on the board?

Now that you know what a board member’s responsibilities are, let’s go over the different positions on a board. Keep in mind that not all businesses have the same positions. It all depends on their bylaws and the structure of the company. However, for most businesses, these are the standard positions.

• Board Chair — The board chairperson acts as a leader and presides over meetings to ensure that they are conducted in an orderly fashion. CEOs, more often than not, usually are the board chair. 
• Vice-Chair — They preside when the board chair isn’t present and usually provide support to the chair.
• Secretary — A secretary’s role is important to meetings. They are responsible for distributing meeting packs, recording minutes, and overseeing the compliance requirements of the board.
• Treasurer — The treasurer is concerned with all the financial transactions for the company. The treasurer chairs the finance committee and tracks the investments of the company.
• Board Directors — The board directors are the ones in charge of strategic planning and oversight. Board members are classified into two:
• Executive Directors who are responsible for the strategic planning and report to the other board of directors.
• Non-Executive Directors act as advisors that can help in making corporate policies. They help protect the stakeholder’s interests. 

The Differences between Nonprofit and For-Profit Boards

The board structure of each organization varies, mostly based on their type: for-profit or nonprofit. Their differences are often found in the companies’ objectives but can be established in their bylaws. The bylaws of a corporation specify the number of board members and the positions they must hold.

Nonprofit Board of Directors

As we all know, a nonprofit is an organization that does not rely on investments. They are completely reliant on donations and fundraising events. As a result, it is the board of directors’ responsibility to develop a crowdfunding strategy for the organization. 

Moreover, the board also develops the mission and vision of the company. This will serve as a guide for members and employees in developing short-term strategies that are in line with their goals and values. 

For-Profit Board of Directors

Members of for-profit boards are nominated by the nominating committee and then elected by the shareholders, as opposed to nonprofit boards, which rely solely on their bylaws. 

In terms of purpose, for-profit boards exist to contribute to the success of the company and the growth of the shareholders’ investments. It is their responsibility to strategize and implement action plans that will assist the company in meeting its objectives and goals.

Promoting Better Board Governance with Digital Tools

Communication is essential in any business, whether for profit or not. More collaboration implies more interactions and more informed decision-making. As a result, board members must explore options to increase productivity and efficiency. 

There is a wide range of collaboration software available for use by boards of directors, but it is critical to choose the right digital tools. When selecting the right software for your organization, consider factors such as ease of use, accessibility, security, and collaboration features.

Ease of use

If your organization is transitioning to digital and is used to traditional pen and paper, you must consider ease of use. How much time does it take board members to learn it? Is it difficult? Or does it necessarily require technical knowledge? These are just some questions that board members should consider when selecting board meeting software.

Accessibility

As technology advances, more businesses are digitizing their processes. Digitization means going paperless. However, it does not mean that it is always available. Choosing board software that can be accessed at any time of day will be extremely beneficial to your company and organization, especially if you meet in different time zones and locations.

Security

The risk of a cyberattack is inevitable. But the good thing is there is always a way to minimize it. One way of doing it is choosing a secure collaboration software that allows you to conduct meetings and manage confidential documents online. 

Collaboration features

Nowadays, more businesses use a hybrid work setup. The majority of their meetings are held online. The lack of interaction in online meetings is a problem. It is important to consider virtual collaboration tools, especially in meetings. It’s a big plus for board software if it allows you to manage the presenters, collaborate on documents in real-time, and perform page synchronization.

Enhancing Board Performance with Convene

The job of a board member is difficult. Running a business and making decisions require a great deal of experience and knowledge. However, understanding the job description, roles, and responsibilities can help you become an effective member to keep your company on track. Investigate opportunities and learn to adapt to your surroundings. Using tools like board management software can be extremely beneficial. 

Discover the advanced features of Convene and see how it can help your board directors execute their duties and responsibilities better.