The primary role of boards is they have to set policies that are strategic and crucial decisions, and supervise the activities of the organization. The right policies help boards concentrate its efforts, prevent the duplication of efforts and maintain the essential (but often thin) distinction between oversight and management activity.
Effective boards should be able of identifying and addressing the ever-changing mission-critical issues. To do this, boards should have access to as accurate and complete information as is possible. That information can include detailed reports on expenditures and budgets as well as financial statements including quarterly and annual performance results and narrative reports on internal operations and programs, and much more. It is essential for a board to comprehend and be competent in communicating the narrative presented by these data.
Board members must be capable of discussing controversial and difficult issues, even if it creates tension within the group. It’s important for directors to have the freedom to challenge one another and play a variety of roles on the board – the ruthless cost cutter, the damn-the-details big picture guy, or the split-the-differences peacemaker. Different roles allow directors to have a better understanding of the options that the board has.
Research suggests that while it is generally believed that good board members possess a high level of personal stake in their business However, this isn’t always the situation. For instance, the boards of failed companies and those of highly admired corporations were essentially the same in terms of percentage of outsiders. The key is in the process of understanding and communicating the company’s risk and strategy and in the quality of discussion and dialogue.
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