The role of the board
At the broadest possible level, the board has two fundamental responsibilities: to ensure compliance and to improve performance.
On a day-to-day basis, these responsibilities need to be expanded and spelled out so that the role of the board and management is clear. Many boards now specify exactly which issues require board involvement, and in many board charters a section dealing with ‘Matters Reserved for the Board’ is included.
The more significant roles for most boards are:
- Monitor and Evaluate
- Mentor and guide
- Set remuneration and assess
- Appoint and remove, as required
- Establish suitable indicators of performance
- Monitor on a regular basis
- Make strategic decisions based on this information
- Provide overall long term direction
- Development of specific goals and targets
Risk Management (Financial and Other)
- Ownership of risk management policies and practices
- Monitor and provide regular updates of risk management policies and practices
- Ensure organisation meets all necessary regulatory and reporting requirements
- Provide leadership to the organisation in an appropriate way
- Set policy agenda for organisation
- Endorse direction as appropriate
- Approve values, codes and ‘standards’ for the company
- Confirm behaviours and policies align with these standards
Communication and Relationship Management
- Manage communication with key stakeholder groups, including shareholders and other relevant groups to assist the organisation achieve its goals
- Set policy framework for crisis management
- Exercise control in times of crisis
This listing captures the essential responsibilities of a board in Australia and provides a sound basis for a discussion at board level as to the specific requirements for any individual board.
The board has the final responsibility for the success or otherwise of the company, and in that regard, it is necessary for the board to decide how it should operate to best meet the objectives of the company. No single ‘Role of the Board’ will match every situation. Each board will have different priorities and be at a different stage in development that will require any generic statement to be tailored to reflect the particular organisation.
Boards have a responsibility to determine the policies, practices and operating frameworks for a company. Any board will be in better position to add significantly to the company if the role is clear, well understood and communicated broadly, than if this responsibility is left to chance or hidden amongst procedural matters and lengthy charters.