Board of Directors Responsibilities

Many people become board members of an organization because they wish to, and feel that they can make a valuable contribution to that organization. Unfortunately, in many cases, those individuals are not properly taught their responsibilities. In the majority of cases, this is not the fault of the individual new board member, but rather the fault either of the organization for not having an adequate training program and manual in place. In other situations, the obstacle is that the individual who was supposed to train this new Board member, either did not, or was not well versed enough himself to do an adequate job.

Board members must know up-front what is expected of them, what the time commitment might be, what expenses might be incurred, if any financial contribution is expected as part of the position, etc. In addition, board members must fully understand their fiduciary responsibility is, and the necessary prerequisites. Fiduciary responsibilities refer to the trust placed in each board member to act responsibility, without conflict, and to educate himself in the financial considerations necessary for the particular organization. A board member must avoid even the appearance of any conflict of interest by recusing himself from voting or discussing any matter that he may have a personal or financial conflict in.

Board members must also remember to operate using the "prudent man rule," or investing or using organization's monies only in a manner that a prudent (or careful, conservative) person would. The board member must remember that while one may consider something suitable personally, the risk one is willing to assume personally, with ones own personal funds, might not be suitable for an organization. For example, while an individual may have considered it appropriate to have invested personal funds with Bernard Madoff, it was not appropriate for organizations to decide to invest money with him. Even if the Madoff investments were legitimate and truly profitable, most experts would not consider it "prudent" for an organization to invest in any "hedge fund," because of the inherently risky nature of that kind of investment and the lack of oversight regarding hedge funds.

A board member must perform whatever duties, in terms of committee work, commitments, leading by example, etc., might be necessary to enhance the organization's viability and performance. Board members generally assume the fiscal responsibility of evaluating budgets, and understanding whatever nuances are most important and unusual and specific to the particular organization. Board members must question all aspects of a budget, until completely satisfied that all possible alternatives have been considered and that the budget is in the best interests of the organization. A board member must insist upon budgets being prepared using "zero-based budgeting" methodology. Investopedia.com defines "zero based budgeting" (ZBB) as "a method of budgeting in which all expenses must be justified for each new period." It "starts from a 'zero base' and every function within an organization is analyzed for needs and costs." While zero-based budgeting often lowers expenses by eliminating across-the-board percentage increases, it is, by its very nature, more time-consuming. Because of that, many organizations opt to only follow zero-based budgeting every few years, assuming that the amount of annual savings does not justify the expense. While there is no doubt that it is a time-consuming process, those organizations that are dutiful in following this technique, are generally run the most effectively and efficiently, while those that opt to do this only periodically, tend to continuously procrastinate and delay between budgets when zero-based is once again utilized. Using zero-based budgets is not only cost-effective, but it has the added benefit of forcing Board members to "think outside the box," and actually analyze cost/ benefits, and alternative ways of doing things.

Many organizations use their board as a "training ground" to develop future leaders of the organization. This makes it even more important that board members be properly trained and indoctrinated about all areas involved regarding the organization. After having consulted to numerous organizations over the past three decades, I have witnessed that organizations that assure that their Board is effective are almost always more effectively led. Unfortunately, as in many other areas related to leadership training as it relates to organizations, most do not adequately train their Board's either. An effective Board is even more important during periods when an organization may have a leader or leaders that are not as "strong" and effective as may be optimum.