The board’s job is to provide guidance and supervise the executive management team. It makes sure that company policies are followed and that all fiduciary obligations are adhered to. Some boards grant too much power to executive leadership. Most do not. Unfortunately, the media is flooded with stories of business catastrophes which are the result of corrupt or incompetent management teams.
To prevent such disasters from happening It is essential to ensure that your board has diverse perspectives and capabilities. It should also work effectively as a team. This requires you to establish specific management guidelines for your board that include taking into consideration diversity when forming your board and taking on leadership roles, fostering an agile structure (e.g. the formation of committees to deal with new risks) and engaging in ongoing evaluation of the board as a whole and the individual members.
Another board management principle is to avoid getting too involved in operational issues, particularly when dealing with the day-to-day operations of your company. The primary role of a board is to set the long-term vision of your business and its place in the society.
Although it might sound like a no-brainer, a lot of companies struggle with this concept. For example the board members may begin having direct meetings with management without consulting the CEO, or jump to conclusions in an effort to be helpful. This puts the CEO in a bind spot. In the ideal scenario, the CEO will work with the board chair and other directors to work out a solution to this issue and build trust once more.
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