Serving on a Board of Directors and providing corporate governance to both for-profit and non-profit entities is a noble cause. When you join a corporate board you become accountable to a variety of constituents and assume a fiduciary duty and liability. Depending upon the type of corporate entity, these constituents may include shareholders, stakeholders, customers, employees, government regulatory agencies and the community at large.
Before making a commitment to join a Board of Directors, I would strongly encourage you to first do your own “due diligence” and get a “flavor” for that company or organization. Taking on a role as a member of the governing body, in some cases, involves the risk of personal financial exposure.
If you are entertaining an offer to join a Board of Directors, at either a for-profit or non-profit organization, I would suggest that you proceed as follows:
1. Board Orientation Process- review the board orientation process to ensure that one exists and to assess how well the corporation is preparing you to fulfill your fiduciary duties:
• Does the company or organization have a formal new Board member orientation process?
• Does the process include an historical perspective of the organization to include governance changes such as bylaw modifications?
• Does the process cover the importance of protecting confidential information?
• Does it cover how to provide management with an appropriate level of Board oversight without interfering with management’s role in handling day to day operations?
2. Review one or more Board packages (you may be asked to sign a non-disclosure agreement (NDA) prior to providing you with the material) – the quantity and quality of information provided by management to the Board will speak volumes about how serious both the Board and Management take their respective
• Is the information comprehensive enough to
provide a meaningful overview of all aspects of the corporate activities?
• Are the financial reports thorough enough to evaluate the financial condition of the company without being so detailed as to negatively affect the Board member’s effective use of time?
• How have past legal or regulatory issues been resolved. Are there any issues pending and if so, what are the expectations for resolution?
3. Select a few current and past Board members to meet with individually:
• Ascertain each individual’s personal commitment to the mission of the organization. How do they view their role as a fiduciary in performing the legal duties as a member of a governing body?
• Is the current Board comprised of individuals with diverse skill sets and experiences?
As a member of a Board of Directors you may wonder “how do I fulfill this enormous responsibility to all of these disparate groups,” and also provide proper oversight to management? I believe if you follow the template outlined above, you will be in a much better position to assume the responsibilities once you have accepted the offer.
One final word of caution – I have always been surprised by how many years it takes to build a successful company or organization and how quickly one person in a key position can destroy that entity. In my judgment, it usually traces back to a failure of the Board of Directors exercising its fiduciary duty.
When you make the decision to become a Board member I would advise you to “check your personal agenda” at the door. In addition, when discharging your duty trust your gut – your instincts are usually “spot on.”
Effective Board governance demands independent thinking and actions in order to ensure the long-term viability of any corporate entity.
Mr. Hatt, a resident of Viera, Florida, spent more than forty years in executive roles within the financial services industry and served on numerous for-profit and non-profit Boards of Directors including the role of Chairperson. He’s contact information is email@example.com