Boards are legally obliged to exercise their due diligence to ensure that the organization fulfills its goals, has a sound strategic plan, and doesn’t fall into legal or financial problems. However, the way boards take on the exercise of their duties can differ dramatically and is largely dependent on the circumstances of the company.
A common mistake is that boards get involved in operational details which should be left to management, or they aren’t aware of their own legal responsibilities for the decisions they take and the actions they make on behalf of the company. This confusion is usually caused by not keeping up with the evolving requirements on boards or the unexpected issues such as financial crisis and resignations of staff. Most of the time, this can be addressed by allowing for discussion about the challenges faced by directors, and by giving them an orientation and simple written material.
Another common mistake is that the board over-delegates its power and decides not to review the matters it has delegated (except in the smallest of NPOs). In this case the board is no longer able to perform its data management: key to M&A success evaluation function and not be able to determine whether these operations contribute to a satisfactory performance of the entire organization.
The board must also develop a governance plan, which includes how it interacts with the general manager or CEO. This includes determining how the board will meet regularly, the manner in which its members will be selected or removed and how the decisions will be made. The board must also develop information systems that collect data on their past and expected performance in order to assist them in making decisions.
