Monday, January 15, 2007

On the Board

From my weekly (AM) radio segment titled "Legal Minute".

Given recent headlines, it’s helpful to know what are the functions and responsibilities of the boards of directors or board of trustees. Boards of directors occupy twin roles involving support and governance. The primary functions of the Board are to: provide continuity to the organization, select the CEO, govern the organization with broad policies and objectives, acquire resources for operations, and account to the public for activities and expenditures of the organization. Other responsibilities of the Board include acting as the court of appeal for disputes within the organization, enhancing the organization’s public image and assessing the Board’s own performance. The support role of the Board is designed to ensure the organization’s success while the governance role of the board is to protect the shareholders and the public interest. Both of these board roles are distinguished from management of the organization which is a function reserved for the CEO. Directors on the board are each bound to fiduciary duties – similar in nature to those of agents or trustees. In the US, the Sarbanes Oxley Act introduced new standards of accountability for Boards and we may see more of that in the wake of the recent scandals.