Boards of directors responsibilities have three formal obligations that each member must fulfill The duty of careBoard members are bound by a legal responsibility to act in the best interest of the company and make decisions with the company’s mission in mind. Duty of Loyalty Each member must put his personal and professional interests aside when making decisions for the company. Duty of Obedience – Each member is legally bound to ensure that the company abides by all applicable laws, and abides by standards for good governance.
Beyond these three obligations, boards of directors have a broader range of responsibilities that differ according to the specific requirements of each business. For instance when your company is a public entity then the majority of the responsibilities of your board includes supervising the CEO and ensuring that the financial statements are in order. If you’re an internal company, your board could focus more on developing strategic goals and setting the direction of your company.
A board’s responsibility also includes the maintenance of a balance in managing risk. For instance, your board might be required to intervene and prevent any crises that could harm your company’s reputation, even if it’s not their legal or ethical obligation. Boards must also ensure that their members are aware of the potential risks of serving on their boards and are prepared to manage the risks in a responsible manner.
Each board member plays an essential and unique role in helping your business grow. It is crucial to know the responsibilities of your board, and how they align with the goals of your company. Aprio’s software for board portals, for example can help you streamline your tasks and conduct meetings efficiently.