Board of Directors – Standard Bearers of Performance

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

The actions taken by the Board of Directors of an organization sets the standard of excellence for how an organization will operate. Boards are comprised of business and civic leaders and are chosen for specific talents, connections or leadership qualities. The characteristics a leader has shown in other capacities is often what draws a board of directors to ask certain people to join their board. Chief executives and savvy board members understand the importance the composition of a board has on its performance. The Board will usually select from its membership certain members to serve as officers such as, President or Chairman, Vice-President, Secretary, and Treasurer. The Officers selected have legally binding obligations requiring more time than other board positions.

One of the duties of the Board includes setting the standards for how the company will operate. Boards representing nonprofit charity organizations should hold its officers and directors to the highest ethical standards. A fund-raising charity can ill afford to have questionable dealings with the donations it is trusted to utilize wisely. A fund-raising organization with a Board of Directors comprised of members with questionable character or business dealings will have a difficult time raising money to carry out its mission. Once the organization is labeled with the charge of mishandling donations, capable and talented people will be unwilling to join the board.

A Board of Directors also sets the pace of a corporation, whether for profit or not-for-profit. A Board of Directors wanting to move the company forward quickly will meet frequently. Time frames will be given to the CEO on certain high profile projects and reports will be demanded on progress and sticking points of projects. Minutes of previous meetings will be scrutinized and discussed to ensure nothing is being forgotten or not addressed. A poorly performing company facing critical deadlines will often need this type of “hands-on” Board to keep the company on task and meeting deadlines.

The Board of Directors should focus its efforts on policy and strategy leaving operational issues up to managers. The Board should allow the CEO and the company’s management to operate on a day-to-day basis. The polices must give enough guidance to the CEO to show the intent of the Board, but must have enough flexibility to allow the CEO to respond to the business world in a logical manner. The Board must also delegate certain responsibilities to the Chairman of the Board and other Officers to carry out business between meetings. The Chairman of the Board and the Treasurer of the Board also have legal responsibilities to ensure the Quarterly and Year End Tax fillings are completed properly. The Secretary of the Board is usually charged with maintaining accurate corporate board decisions as required by the Security and Exchange Commission.

The composition of the Board of Directors is the key to how a company will operate. A caring thoughtful, committed Board will keep the CEO and the company on task. A Board of Directors will set policy and follow-up with the CEO to ensure policy is adequate to convey the intent of the Board, but flexible enough to allow the company to carry out day-to-day business activities. A Board that is not committed to the company or a Board too preoccupied to hold regular meetings and demand accurate and complete reports from the CEO will not run a smoothly operating and effective business. The CEO of the company must find ways to engage the Board of Directors and keep the Board engaged or the company as a whole will falter due to a lack of direction and lack of focus from the top. The attitudes and work habits of the Board of Directors will be reflected in the standards of the CEO. A Board demanding high performance, high ethical standards, and a strong work ethic from themselves will be rewarded by seeing the same standards applied to the company or organization they govern.

© Dr. Earl R. Smith II

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Related Articles:

• Visionary Boards of Directors

• Market-Driven Boards

• The Succession Committee – Selecting Leadership for the Future

• Leadership Development – Good Board Governance

• Board of Directors Responsibilities – Compensation Committee

• Corporate Board Dangers

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