Building and Maintaining an Effective Board of Directors

Sections of this topic

    Free Micro-eMBA Module #5:

    © Copyright Carter McNamara, MBA, Ph.D., Authenticity Consulting,
    LLC
    .

    This module is in the organization development program. However,
    this module can also be used by anyone as a self-study exercise
    to learn more about building and maintaining a board of directors.

    Sections of This Module Include the Following

    Introduction
    Outcomes
    Materials for Review
    Suggested Topics for Reflection and Discussion
    Activities to Build Systems and Practices
    Assessments
    Tracking Open Action Items


    INTRODUCTION

    If you are an incorporated business, it’s very likely that
    you have already at least the beginnings of a board of directors.
    Theory and law dictate that the board of directors is responsible
    to govern your organization. Typically, new boards of directors
    in a new organization work hands-on, almost as partners — or
    as a “working board” — with the chief executive. A
    wise CEO will see Board members almost as strategic partners,
    rather than as a necessary evil that corporations must have.

    It’s not uncommon, especially for new organizations, to act
    as if they are lucky even to have anyone on their board. Wrong!
    You deserve — and should always expect — to have a very participative
    board that, no matter how hands-on they are at first, also attend
    to major decisions about the organization.

    For the organization to grow and remain healthy, board members
    must grow in their roles to become more of a “governing board”.
    Completion of this module will ensure that your board has the
    necessary components, policies, and practices in place from which
    to develop a healthy governing board.

    Note that you, as a learner in this program, can greatly enhance
    the development of your board by continuing to involve board members
    in discussions about topics and questions posed by this program.

    NOTE ABOUT THE ORDER OF MODULES (AND SOME DUPLICATIONS WITH
    PREVIOUS MODULE ON THE ROLE OF CHIEF EXECUTIVE OFFICER): The modules
    about starting an organization and about the role of chief executives
    briefly mention certain activities in regard to building a preliminary
    board of directors — there is a little bit of necessary duplication
    between these two modules. This module helps the learner to round
    out the board of directors and ensure they are fully functioning
    for the organization.

    NOTE ABOUT BOARD COMMITTEES: Consider establishing a Board
    Development Committee (in the case of corporations) to review
    and help guide the implementation of the information in this learning
    module. Major activities and goals from this learning module could
    be incorporated into that Committee’s Work Plan.

    Also, consider
    Related Library Topics


    OUTCOMES

    Learners who complete this module will achieve the following
    outcomes:

    1. Understand the Roles and Responsibilities of a Board
    2. Adopt Board Policies
    3. Build Board Committees
    4. Recruit New Board Members
    5. Ensure Strong Participation of Board Members
    6. Prepare for Board and CEO Evaluations
    7. Build Board Calendar to Schedule All Operations
    8. Organize a Board Manual
    9. Train Board Members
    10. Assess the Health of Your Board Practices

    MATERIALS FOR REVIEW

    • The following materials will help you address each of
      the topics and learning activities in this module.
    • NOTE: There are many materials included for review in
      this section. However, you do NOT need to review all of them
      in detail.
      a) You do not need to follow links out of the following documents
      b) You do not need to follow links in the “Also see” sections
      c) You do not need to review any materials marked as “nonprofit”

    Board Roles and Responsibilities

    Overview
    of Board Roles and Responsibilities (read all “for-profit”
    and quickly scan some job descriptions)

    – – – Overview
    of Roles and Responsibilities of Corporate Board of Directors
    (read all)

    – – – Board
    and Staff Responsibilities (read all)

    Some
    Legal Considerations for Board Members

    Sarbanes
    Oxley Act

    Insurance
    Against Liability

    Board Operations

    Board
    Operations and Systems (read introductory paragraph)

    – – – Depiction
    of “System” of For-Profit Board

    – – – Sample
    Board Operations Calendar (read all)

    Documents — Charter/Constitution/Articles, Operating Rules,
    Policies, etc.

    Articles
    of Incorporation (scan one in the “for-profit” section)

    Corporate Bylaws
    (scan this one to get a sense of what’s in a bylaws)

    Corporate
    Resolutions (is a single act of approval to approve, e.g.,– scan
    one)

    Board
    Policies (scan the names of some of the policies)

    Staffing the Board

    Staffing
    the Board

    – – – Joining
    a Board (read a few articles)

    – – – Sample
    Board of Directors Recruitment Grid

    – – – Guidelines
    for Recruiting New Board Members (read all)

    – – – Sample
    Contents of Board Member’s Manual (read all)

    – – – Orienting
    New Members to Boards of Directors (read all)

    – – – Basic
    Guidelines and Sample Agenda for Board Training Session (read
    all)

    – – – Compensating
    Board Members

    – – – Removing
    Members (read several)

    Ensuring Successful Committees

    Forming Board Committees
    – – – Typical
    Types of Board Committees (read all)

    – – – Sample
    of a Board of Directors Committee Work Plan

    – – – Ideas
    to Generate Participation in Committees (read all)

    – – – Guidelines
    to Form an Advisory Group (read all)

    Ensuring Successful Meetings

    Board
    Meetings General Guidelines

    – – – Sample
    Board of Directors Meeting Agenda (read all)

    – – – Basic
    Sample of Board of Directors Meeting Minutes (read all)

    – – – Board
    Attendance Policy (Sample) (read all)

    – – – Board
    Retreats (read all articles)

    – – – Annual
    General Meeting

    Evaluating the Board

    Evaluating
    the Board and Members (read introductory paragraphs)

    – – – Evaluating
    the Board of Directors (read all)

    – – – Self Evaluation (read all)

    Board and Staff Relations

    Board
    and Staff Relations (read all)

    – – – Board
    and Staff Responsibilities

    – – – Suggestions
    to Enhance the Working Relationship Between the Board Chair and Chief
    Executive

    – – – How
    Much Should Your Board Be Involved in Management?

    Evaluating CEOs

    Evaluating
    the CEO

    – – – Guidelines
    for Evaluating the Chief Executive (read all)

    – – – Sample
    Form to Use During Evaluation of Chief Executive (read all)

    – – – Sample
    of a Board’s Supervisory Skills Development Plan for the CEO


    SUGGESTED TOPICS FOR REFLECTION
    AND DISCUSSION

    • Learners are strongly encouraged to discuss the following
      questions with peers, board members, management, and employees,
      as appropriate.

    Board Roles and Responsibilities

    1. Name the five duties and ten responsibilities of the boards
    (as listed on the materials included in your materials for review)?
    (Note that various experts might offer a different mix of duties
    and responsibilities. The important point here is to get a basic
    sense of the overall responsibilities of a board.) See Overview of Roles and Responsibilities of Corporate
    Board of Directors
    .

    2. To whom is a board of directors responsible, that is, to
    whom do they “report”? See Overview of Roles and Responsibilities of Corporate
    Board of Directors
    .

    3. What is the board chair responsible for? vice chair? secretary?
    treasurer? See Sample Job Descriptions for Members of Boards
    of Directors
    .

    4. Test your knowledge of the roles of the board and staff by completing
    the table at Board and Staff Responsibilities — Test Your
    Knowledge
    . Be sure to compare your answers to the table at
    Board
    and Staff Responsibilities
    .

    Board Operations

    1. What are the recurring major activities of a board of directors?
    See Sample Board Operations Calendar.

    2. What are some of the recurring yearly activities that a
    What the board should do? See Sample Board Operations Calendar.

    3. What are at least five ideas to generate and sustain the strong
    participation of board members? See Ideas to Generate Participation in Committees.

    Board Policies

    1. What is the purpose of board policies? See Board Policies.

    2. What is the purpose of board bylaws? See Corporate Bylaws.

    3. What is a board manual? Name as many board manual contents
    as you can. See Sample Contents of Board Member’s Manual.

    4. What is a board resolution? See Board Resolutions.

    Board Staffing (Recruiting, Orienting, Training, Informing)

    1. What is the most important consideration when you set out
    to recruit new members to your board? See Guidelines for Recruiting New Board Members.

    2. How many guidelines can you name for orienting employees?
    See Orienting New Members to Boards of Directors.
    Informing them on a regular basis? See How Do We Keep Board Members
    Informed?

    3. How should you train your Board members? See Basic Guidelines and Sample Agenda for Board
    Training Session
    .

    4. What should you consider when deciding the compensation
    to your Board members? See Compensating Board Members.

    5. What’s involved in removing board members? See Removing Members.

    Board Committees

    1. What is the purpose of a board committee? See Typical Types of Board Committees.

    2. What is a standing committee? Ad hoc committee? When should
    each type be used? See Typical Types of Board Committees.

    3. How many committees can you name and what is the purpose
    of each? See Typical Types of Board Committees.

    4. What is an advisory group (or committee or board)? See Guidelines
    to Form and Advisory Group
    .

    5. What is a work plan for a committee? See Sample of a Board of Directors Committee Work
    Plan
    .

    6. Can you name at least 4 of the ideas to generate participation
    in committees? See Ideas to Generate Participation in Committees.

    Board Meetings

    1. What is a board meeting agenda? How are they developed?
    See Sample Board of Directors Meeting Agenda.

    2. What is the purpose of board meeting minutes? What should
    be included in the minutes? See Basic Sample of Board of Directors Meeting Minutes.

    Board Evaluations

    1. How does the board evaluate itself? What is considered during
    the evaluation? How often should the board evaluate itself? See
    Board
    of Directors Self-Evaluation
    and Evaluating the Board of Directors.

    2. How does the board evaluate the chief executive officer?
    See Guidelines for Board of Directors Evaluation
    of Chief Executive
    and Sample
    Form for Board’s Evaluation of the Chief Executive
    .

    Special Topic — Board Liabilities

    1. Is your board aware of any potential liabilities? Should
    your board members consider getting any certain forms of insurance?
    See Some Legal Considerations for Board Members
    and Insurance Against Liability.

    2. What are the ramifications of the Sarbanes Oxley Act for
    your company? See Sarbanes Oxley Act.


    ACTIVITIES TO BUILD SYSTEMS AND
    PRACTICES

    • Learners are strongly encouraged to complete the following
      activities, and share and discuss results with peers, board members,
      management and employees, as appropriate.
    • Note that the roles of your board and employees will become
      more clear as you complete strategic planning and product planning
      later on in this program.
    • As you proceed through the following activities, be sure
      to note any incomplete actions in the Action Item Planning List.

    Specify Your Board’s Roles and Responsibilities

    1. Clarify what your board will be doing and your staff will
    be doing. Complete the Board and Staff Responsibilities — Test Your
    Knowledge
    according to the wishes of your board. You can compare
    your preferences to those suggested in the table at Board and Staff Responsibilities.

    Authorize Up-to-Date Board Policies

    1. Adopt an up-to-date and acceptable set of bylaws. Before
    the next meeting, the board chair and CEO should write a memo
    that highlights important points from the current bylaws. Or,
    they might make marks in the margin of the current bylaws as a means
    to highlight important points. Include these highlights in the
    board packet of information that gets sent to each board member
    before the next meeting. Set aside 20 minutes in an upcoming board
    meeting to collect feedback about the current bylaws. Consider
    board resolutions to make any changes to the bylaws. Once changes
    have been made, consider a resolution to formally adopt the bylaws.
    See Corporate
    Bylaws
    .

    2. What board policies will you need? Draft — and carefully
    enforce — a policy for board attendance. See Board Attendance Policy (Sample).

    3. What other policies are required by Sarbanes Oxley? Role
    of Audit Committee? Whistleblower? Document Retention/Destruction?
    See Sarbanes Oxley Act.

    Organizing Your Board Committees (Includes Recommendations)

    1. What board committees should you have? You should have at
    least an executive committee that can meet between board meetings,
    if necessary. This committee could be comprised of chairs of other
    committees and/or officers of the board. To identify other needed
    committees, carefully consider the types of major issues that
    your organization faces and any strategic goals to be accomplished
    over the next year. What is the nature of these goals and issues,
    for example, audit, compensation, financial, board development, and personnel? If possible, establish committees for each of the
    major types of issues and goals faced by our organization. See
    Typical
    Types of Board Committees
    .

    Recommendation: Establish the Following Initial Board Committees

    2. Strongly consider establishing at least the following board
    committees. Each of the following committees can help you accomplish
    major sections of this Online For-Profit Organization development
    program. Each of the following committees should have its own
    work plan. The work plan should include goals to accomplish the
    major activities specified in the associated sections of this
    online program.

    Strongly Suggested Standing Committees to Have:
    a) Executive Committee — This committee can be comprised of chairs
    from other committees and/or officers of the board. See Executive Committees — To Be or Not To Be.
    b) Board Governance Committee — This could be done by the executive
    committee for now. This committee also could include nominating,
    orienting, and training new board members. See Board Governance Committee.
    c) Audit Committee — See Setting Up an Audit Committee.
    d) Marketing Committee
    e) Finance Committee

    Other Standing Committees to Consider:
    f) Personnel Committee
    g) Product Evaluation Committee

    Committees to Consider Organizing as Needed:
    h) Planning Committee (this can be comprised of the chairs of
    other committees)

    Note that you will probably have a much clearer idea of what
    committees to have when you get done with your strategic planning
    in an upcoming module. See Description of Typical Committees.

    3. Quickly establish work plans for your committees. As soon
    as your board has approved the new organization of committees,
    be sure that each committee sets about to develop its own work
    plan. Using a work plan is one of the best ways for committees
    to stay effective and engaged. See Sample of a Board of Directors Committee Work
    Plan
    .

    Staff Your Board With Needed Skills

    1. Identify what skills are now needed by your board. Again,
    consider the nature of major issues and goals currently faced
    by your organization. Also, reference the Sample Board of Directors Recruitment Grid.
    Write down what skills are needed.

    2. Develop procedures for recruiting and orienting board members.
    Include steps to recruit members, orient members, get completed
    applications from board candidates, and elect new members. Consider
    the information in Guidelines for Recruiting New Board Members,
    Orienting
    New Members to Boards of Directors
    and Sample Board Application Form. Have the entire
    board reviews the procedures for acceptance and authorization.

    3. Use your new procedures to begin recruiting new board members.
    (The size of the board is usually specified in the bylaws. You
    can recruit enough members to reach this size. If the size needs
    to be changed, consider a resolution to modify the bylaws.)

    Ensure Strong Participation of Board Members (Board Meetings)

    1. Get board packets out to members at least a week before
    each meeting. One of the clearest indicators to board members
    that the organization is not taking them seriously if they
    don’t get materials in time for adequate review before board meetings. Write
    a procedure for your staff to always send out a packet of meeting-preparation
    information to board members at least one week before the next
    board meeting. In the packet, include at least the following:

    a) agenda for the upcoming meeting
    b) report from the chief executive about major accomplishments
    and current issues and plans over the next two months
    c) financial reports, including at least a budget report and cash
    flow statement
    d) materials that can help board members act on any major decisions
    expected from them in the next meeting

    2. Expect nothing less than a full (or excused) absence from
    meetings. What kind of attendance are you getting at current board
    meetings? Are you regularly getting at least a quorum of members?
    (The quorum is the minimum number of members that must be present
    in a meeting for that meeting and its processes to be considered
    official. The quorum is usually specified in the bylaws). If you
    are not getting strong attendance, then be sure to enforce a Board
    Attendance Policy (Sample)
    . If you don’t enforce this policy,
    then you have a major problem — the problem is that you
    aren’t taking it seriously to expect and pursue a strong board
    of directors.

    3. The board’s worst enemy — the “numb out” factor.
    One of the first signs that a board is in trouble is when members
    have opinions that they don’t express during meetings. If you
    find yourself sitting in a board meeting and realize you have
    “numbed out”, then you’re not doing your duty as a board
    member. Do you need to follow any of the guidelines in Ideas to Generate Participation in Committees?

    Ensure Your Board and Chief Executive are Really(!) Effective

    1. Establish a procedure for regular board self-evaluations.
    Don’t just “go through the motions” and not evaluate
    whether the board is really effective or not. How does your board
    evaluate itself now? Do you have a procedure that has been accepted
    and authorized by board members? Is your board evaluating itself
    on a regular basis? The board should conduct evaluations on a
    yearly basis, or at least every two years. If the board isn’t
    evaluating itself on a regular basis, then make this point to
    discuss in an upcoming meeting. Consider the information in the Board of Directors Self-Evaluation and Evaluating the Board of Directors.

    2. Establish a procedure for evaluating the chief executive
    on a regular basis — preferably once a year. Don’t just “go
    through the motions” and not evaluate whether the chief executive
    officer is really effective or not. Does your board evaluate your
    chief executive officer? How often? How are the results used?
    If you are not evaluating the chief executive on a regular basis,
    then why not? Make this a point to discuss in an upcoming meeting.
    Consider the information in Guidelines for Board of Directors Evaluation
    of Chief Executive
    and Sample
    Form for Board’s Evaluation of the Chief Executive
    .

    Clearly Communicate What Your Board Does (Board Operations)

    1. Establish a calendar of the recurring major activities to
    be conducted by your board each year. The calendar should be accepted
    and authorized by the board. Consider the information in the Sample Board Operations Calendar.

    Ensure Adequate Protection from Liabilities

    1. Conclude what insurance you do and don’t need for board
    members. Is your board aware of any potential liabilities? Should
    your board members consider getting any certain forms of insurance?
    Consider the information in the
    Legal and
    Insurance Considerations for Board Members and
    Overview of Liability Insurance (including Directors’
    and Officers’ Insurance).

    Build a Board Manual for Each Board Member

    1. Ensure that each board member has a policies manual that
    contains at least the following policies and materials. See Sample
    Contents of Board Member’s Manual
    .

    a) Description of roles and responsibilities of your board
    – see Overview of Roles and Responsibilities of Corporate
    Board of Directors

    b) Job descriptions for each board member and officer position
    – see Sample Job Descriptions for Members of Boards
    of Directors

    c) Descriptions of your board committees, their overall responsibilities
    and work plans – see Typical Types of Board Committees

    d) Policies for recruiting new members, orienting them, informing
    them and removing them – see Joining, Recruiting, Orienting, Informing, Removing
    Board Members

    e) Your board meeting attendance policy – see Board Attendance Policy (Sample)

    f) Procedure for evaluating your board of directors – see Board
    of Directors Self-Evaluation

    g) Procedure for evaluating your chief executive officer –
    see Guidelines for Evaluating the Chief Executive

    h) Sample meeting agendas and board meeting minutes – See Sample
    Board of Directors Meeting Agenda
    and Basic Sample of Board of Directors Meeting Minutes

    i) Copies of your articles of incorporation (if applicable)
    and bylaws

    j) Copy of your strategic plan (if applicable)

    k) Board operations calendar

    Train Board Members to Be Highly Effective (Board Training
    Session)

    1. Conduct a board training session to ensure each board member
    fully understands their role and has the necessary resources to
    carry out their role. Review the information in the document Basic Guidelines and Sample Agenda for Board
    Training Session
    . Now draft a training session agenda that
    specifies the topics that will be covered in the session, who
    will address each topic, and how. Schedule and carry out the training
    session.


    ASSESSMENTS

    Consider any or all of the following assessments as means to
    evaluate the health of your board of directors.

    1. Board of Directors Self-Evaluation


    REMINDERS FOR THOSE IN THE ONLINE DEVELOPMENT PROGRAM

    1. Are you exchanging feedback with others about what you’re
    learning in this program?

    2. Are you sticking to your study schedule for this program?

    3. Are you practicing your basic skills in management and leadership,
    including problem-solving and decision-making, planning, and
    meeting management?

    4. Are you communicating throughout your organization by using
    your skills in internal communications?

    5. Are you managing yourself? How many hours a week are you
    working? Are you noticing any signs of stress? If so, what are
    you doing about it?

    6. Are you reflecting on learnings from past modules and how
    they build on the learning in this module? For example, are you
    seeing your organization from a systems view, as explained in
    the module “Starting and Understanding Your Organization?”


    TRACKING OPEN ACTION ITEMS

    1. One of the first indicators that an organization or a person
    is struggling is that open action items are not tracked and reviewed.
    (Open action items are required actions that have not yet been
    completed.) Instead, people only see and react to the latest “fires”
    in their workplaces or their lives. Whether open action items
    are critical to addressing now or not, they should not entirely be
    forgotten. Therefore, update and regularly review a list of open
    action items (identified while proceeding through this program)
    that includes listing each open action item, who is responsible
    for completing it, when it should be completed, and any associated
    comments. When updating the list, consider action items as identified
    during discussions, learning activities, and assessments in this
    module. Share and regularly review this action item list with
    the appropriate peers, board, management, and employees in your
    organization. You can use the following Action Item Planning List. (At that Web address,
    a box might open, asking you which software application to open
    the document.)

    2. If you have questions, consider posing them in national,
    free, online discussion groups hr.com, which are attended
    by many human resource and organization development experts.


    (Learners in the organization development program can return
    to the home page of the organization development program.)


    For the Category of Boards of Directors:

    To round out your knowledge of this Library topic, you may
    want to review some related topics, available from the link below.
    Each of the related topics includes free, online resources.

    Also, scan the Recommended Books listed below. They have been
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