A board’s role is to provide guidance and oversight to the executive management team, ensuring that the company’s policies are followed and that all fiduciary duties are met. Some boards grant too much power to executive leadership. Most don’t. The media is brimming with stories about business failures caused by corrupt or incompetent management teams.
One of the most effective ways to prevent such issues is to make sure that your board is comprised of a wide spectrum of skills and perspectives and can work effectively as a unit. This is why you should establish certain principles of management for your board which include embracing diversity when building your board and taking on leadership roles, fostering an agile structure (e.g. the formation of committees to deal with new threats) and conducting a regular review of the board as well as the individual members.
Another key principle for a board of management is to avoid getting too involved in operational issues, especially when it comes to the day-to-day activities of your business. The primary role of a board is to establish the long-term vision for your company and its role in the world.
Although it might sound like a straightforward idea, many companies struggle with this concept. For example, some board members start having meetings directly with management without the CEO’s knowledge or take a leap of faith in an effort to be helpful. This can put the chief executive in a difficult spot. In the ideal scenario, the CEO will collaborate with the chair of the board and other directors to address the issue and build trust once more.