Sections of this topic
Free Micro-eMBA Module #5: Building and Maintaining an Effective Board of Directors
© Copyright Carter McNamara, MBA, PhD, 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 DUPLICATION WITH
PREVIOUS MODULE ON 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 implementation the information in this learning
module. Major activities and goals from this learning module could
be incorporated in that Committee’s Work Plan.
Also consider
Related Library Topics
OUTCOMES
Learners who complete this module will achieve the following
outcomes:
- Understand Roles and Responsibilities of a Board
- Adopt Board Policies
- Build Board Committees
- Recruit New Board Members
- Ensure Strong Participation of Board Members
- Prepare for Board and CEO Evaluations
- Build Board Calendar to Schedule All Operations
- Organize a Board Manual
- Train Board Members
- 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 “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 for what’s in a bylaws)
Corporate
Resolutions (is a single act of approval to approve, eg,– 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 Working Relationship Between 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 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 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 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
Board should do? See Sample Board Operations Calendar.
3. What are at least five ideas to generate and sustain 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 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 much clearer idea about 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
information in Guidelines for Recruiting New Board Members,
Orienting
New Members to Boards of Directors and Sample Board Application Form. Have the entire
board review 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 is 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 full (or excused) absence from
meetings. What kind of attendance are you getting to 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 information in Board of Directors Self-Evaluation and Evaluating the Board of Directors.
2. Establish a procedure for to evaluate 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 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 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 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 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 ON-LINE 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 in 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 address 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
to complete 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
selected for their relevance and highly practical nature.
