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.
A well put together Board brings together skills and resources needed by the organization. Each Board position should be filled by someone who has financial, technical, legal, communication, marketing, international, language, or operational skills and experience that the Board can use in guiding and evaluating the business’s leadership and employees.
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.
- 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.
- 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.
- 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.