The organization and behavior of a small company Board of Directors (assuming it’s a for-profit organization) depends somewhat on whether it is owned by insiders or outsiders. If the business is owned primarily by outsiders, the board takes a more supervisory or “governance” role. If the business is owned by senior management, the Board takes on a more advisory role.
Here is a “cheat sheet” of the basic principals of how a small company Board of Directors is organized and works.
Board in General
- Hires, motivates, compensates, evaluates, and, if appropriate, fires senior management. (Obviously, the board’s role in these matters is significantly reduced if the senior management team owns the company.)
- Proactively assures that the organization achieves its objectives through its activities.
- Follows the bylaws as well as local, state, and federal laws and regulations.
- Assures the organization meets incorporation and insurance requirements.
Officers in General
- The only people who can legally bind the organization by contract.
President or Chair of the Board
- Sets the “tone” or “culture” of the organization as a whole and the Board in particular.
- Organizes and leads meetings. Sets the agenda and how much time is devoted to each item on the agenda.
- Remains neutral so members feel comfortable expressing opposing views and encourages frank discussion. (Note: Neutrality only pertains to the conduct of discussion during meetings; it does not preclude voting.)
- Knows the organization’s bylaws and Robert’s Rules as appropriate.
- Depending on the bylaws, is an owner or is chosen by the owners.
- Depending on the bylaws, acts as ex-officio member of all committees and may chair committees.
Vice President or Vice Chair
- Acts in the absence or under the direction of the Chair.
Treasurer
- Oversees the assets of the organization, including liquid and capital assets, assuring that they are neither over nor under utilized.
- Assures proper record keeping of financial matters and reports accordingly to the Board.
- Works with an outside auditor to assure transparency, accuracy, and proper use of assets.
- Assures proper filings with tax and relevant federal, state, and local regulatory bodies.
Secretary
- Keeps and distributes records (eg: minutes) showing the decisions made by the Board.
- Handles the routine correspondence of the Board.
- Tracks regulatory compliance by the organization.
- Tracks compliance with the organization’s bylaws.
Non-Officer Director or Trustee
- Has a fiduciary duty to see that the organization achieves its goals in a responsible and ethical manner.
- Presents facts and opinions, based on professional and personal experience, on matters brought before the Board.
- Casts votes for or against proposals put before the Board.
- Unless the Chair is chosen directly by the owners, casts a vote in the selection of the Chair.
Committee Chair
- Organizes and leads meetings for his/her committee.
- Reports to the Board regarding committee activities and results and requests approvals and funding for Committee activities as appropriate.
- Directs decisions and actions of the committee in accordance with the objectives of the organization.