Board of Directors Competence

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Introduction

The success or failure of any organization or company totally depends on its leadership. There are different levels of leadership in any organization and the board of directors plays a very important role in the running and management of any organization. Different organizations have different roles of the board of directors but generally there are basic foundation roles that apply to all the organizations.

This paper discusses the different roles of the board of directors and how competence can be developed as well as the various differences between board of directors in the private sector and non-profitable organisation. Ideal relationship between the board of directors and the executive is also discussed.

Board of directors

The main role of the board of directors in any company or organization is to act as the eyes of the shareholders of the organization. A report by Brefi (2000) claimed that any given board of directors has a role: “to ensure the company’s prosperity by collectively directing the company’s affairs, whilst meeting the appropriate interests of its shareholders and stakeholders” (Brefi, 2000, p. 2).

The board of directors is usually appointed by the shareholders who also have the powers to dismiss it mainly through a vote. The board of directors has different roles that vary from one organization to another.

Oversee vision, mission and values of the organization

It is the primary role of any board of directors to oversee that the Organization focuses at achieving its vision, mission, and values by continuous evaluation of the organization progress. They have the responsibility of determining values to be upheld and constantly review goals and objectives of the Organization. They are also supposed to set and follow up the implementation of policies in the Organization.

A report by Gray (n.d.) was claimed that: “Directors, no matter what their reason for being elected to a board, are responsible for making decisions and setting policy for the organization” (Gray 1).

Carter McNamara (2011) defined the roles of the board of directors as “oversee the purpose, plans and policies of the overall organization, such as establishing those overall plans and policies, supervision of the CEO, ensuring compliance to rules and regulations” (McNamara, 2011, p. 1).

Set strategy and structure

It is the role of the board of directors to constantly do the SWOT analysis of the Organization in terms strengths, weaknesses, opportunities and threats in the current and future situations to ensure the Organization retains its relevance in the society.

It also sets strategies, and ways of achieving them. Most importantly they should the Organization has the necessary Organizational structure and the potential for carrying out the laid down strategies. A report by Score (2011) claimed that the board of directors has the role of “developing and approving strategic plans, including major commitments” (Score, 2011, p. 1).

Delegation

It is important to note that the board of directors cannot do or perform all the activities of their Organization alone and as such the board had an important role of delegating all the necessary authorities to other different levels of management beginning with the chief executive officer (CEO).

McNamara claimed that it is the role of the board of directors to “Select and appoint a chief executive to whom responsibility for the administration of the organization is delegated, including: to review and evaluate his/her performance” (McNamara, 2011, p. 1).

Accountability to shareholders

The board of directors is the eyes and the voice of the shareholders and other stakeholders and as such it has the role of ensuring that the interests, views and expectations are represented in the Organization by effective communication between the management and the shareholders (Brefi, 2000).

A report by McNamara also claims that the board of directors must be in a position to “provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources” (McNamara, 2011, p. 1)

Board competence

For a board to be successful it must be competent. The members must be poses strong interpersonal skills, must be well versed about the various operations of the Organization, they must always be available when needed and must be people of honor and integrity.

Loyalty to the Organization is a requirement and the members must also poses diverse global knowledge in various fields such as law, finances which will enable the board to make good decisions. Competence in the board may be developed by proper recruitment of the right individuals to start with. Rigorous and continual training should be prioritized.

It may also be advisable to keep on renewing the board from time to time to inject new ideas and dynamism. Martinelli (2011) raised concern that “nominating committee or board recruiting committee is poorly organized, board members in turn are not likely to have a good understanding of the organization and their role as board members”( Martinelli, 2011, p. 1).

Relationship between the board and executive

For any meaningful achievement of goals and objectives of any Organization the board of directors and the executive must work together in harmony as a team. Good relationship between the two is therefore imperative.

The board of directors must have the will and commitment of understanding all the important details that concerns the Organization since they may be required to make tough, and wise decisions that the executive needs to drive the Organization to the expectations of the shareholders the directors represent.

The executive expects the board members to adequately prepare and regularly attend meetings while board of directors expects service delivery and regular briefing in return. Both sides expect full and genuine participation from each other. Collective commitment to teamwork and improvement is also important (Kilmister, 2004).

Differences between private sector and non-profit boards

The basic roles of both private and non-profit organizations are similar to some extent but on a close analysis there are many differences between the two which generally arise from their purpose of existence. Private board members set the strategies and standards to be met and delegate the task of achievement to the executive unlike non-profit board members who are directly involved in raising funds for the organisation.

Private sector board members are paid whereas non-profit board members are only reimbursed of their expenses. Private sector board members focus on maximising shareholders investments and have to account for returns unlike non-profit board members who focus on fundraising funds from relevant bodies and focussing their activities to charity affairs (McNamara, 2011, p. 1).

Conclusion

The role of board members plays a key role in the success of any given Organization. The roles include representing the interests of the shareholders in the Organization, making and implementing vision, mission and core values of the Organization and setting and following up on strategies. Competence is a core requirement and the board members are supposed to be knowledgeable people of high integrity.

The board members of nonprofit and private Organizations have differences due to the differences in the functions of the Organizations. The relationship between the executive and the board members is important in that it ensures cooperation and understanding of both parties for the benefit of the organization.

References

Brefi, G. (2000). The Board of Directors – Roles and Responsibilities. Brefigroup. Web.

Gray, C. (n.d) Ethical Responsibilities of Boards of Directors of Non-Profit Organizations. Board Responsibilities. Web.

Kilmister, N. (2004). Eight Basic Expectations a Chief Executive Has of His or Her Board. TCA. Web.

Martinelli, F. (2011). Building an Effective Board of Directors. Create the Future. Web.

McNamara, C. (2011). All about Boards of Directors (For-Profit and Nonprofit). Management help. Web.

Score, K. (2011). Serving on a Nonprofit Board of Directors. ScoreKnox. Web.

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