Legally boards are required to ensure that a company achieves their mission and has a sound strategy and doesn’t get into legal or financial problems. The way boards take on these responsibilities differs greatly and is dependent on the specific circumstances.
A common error is that boards are too involved in operational issues which should be left to management, or they are unclear about their own legal liability for the decisions they take and actions they take on behalf of the organisation. This confusion is often due to the fact that they are not keeping up with the evolving requirements of boards or unexpected issues such as financial crises and resignations of staff. Most of the time, this can be solved by having a discussion of the issues that directors face and by providing them with instructions and a simple set of documents.
Another common error is that the board delegates too much power and chooses not to look into those matters that it has delegated (except in the smallest of NPOs). In this situation the board is unable to carry out its evaluation function and can no longer assess whether these operating activities add up to satisfactory performance for the entire organization.
The board should also come up with a governance system that outlines how it will interact with the general manager or chief executive officer. This includes the determination of the frequency of board meetings and how board members will be chosen and removed, and the manner in which decisions are made. The board should also develop information systems that are able to provide accurate data on its past and projected performance in order to assist in making its decisions.
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