Boards are required by law to exercise their due diligence in ensuring that an organization achieves its goal, has a sound strategy and doesn’t become involved in legal or financial issues. The way boards fulfill their responsibilities varies greatly and is highly dependent on the particular circumstances.
Boards often make the error of becoming too involved with operational issues which should be left to management or they are unclear about their legal obligations for decisions and actions taken by an organization. This is often due to not being able to keep up with the ever-changing demands placed on boards, or from unanticipated issues like unexpected staff resignations or financial crises. Typically, this can be addressed by allowing for discussion of the issues facing directors and giving them orientation and simple written materials.
Another common mistake is that the board is able to delegate its authority and chooses not to look into those matters that it has delegated (except for the tiniest of NPOs). In this situation the board is unable to perform its evaluation function and is unable to determine whether the operating activities are contributing to the performance of the organization.
The board also needs to develop a governance plan, which includes how it will interact with the general manager or CEO. This includes determining the frequency of board meetings, how members will be selected and removed, and how decisions will be made. The board should also create information systems that offer data on past and upcoming performance to help them make decisions.
