The Governance Board and You

by Terrance Malkinson

Some of us may volunteer, be selected or elected to serve as a member of a Governance Board for a nonprofit or for-profit organization. As an employee or a student, you should educate yourself about the Board's role and responsibilities, and understand why they act as they do. Board members are called on to make difficult decisions, some of which may be unpopular but necessary for the competitive success of the organization. Popular or otherwise, the policies that they craft may well influence your career, so it pays to familiarize yourself with their your organization's Governance Board.

In recent years, expectations and accountability for Board members have become more stringent in response to a number of high-profile corporate scandals. Such misdeeds have eroded public confidence in the Board system, which resulted in Board self-reflection and, ultimately, in the passage of the Sarbanes-Oxley Act in 2002.

The Board's role is to govern on behalf of the organization's owners or members; it is ultimately accountable for an organization's performance and integrity. The Board exerts its authority as a team, each member bringing their knowledge and expertise to the group. Divergent viewpoints are valued in discussion. However, once a decision has been made, all Board members are expected to support the majority viewpoint regardless of individual preference.

Board members make decisions with reference to policy. Policy provides a framework for lower-level decisions. This policy is communicated to management for implementation, possibly through a Chief Executive Officer. Management must direct the organization in strict accordance with the Board's direction as expressed through policy. The spirit and boundaries of Board-initiated policy guide decisions.

The Board does not engage in micro-management. Because of its expertise, the Board may provide advice to managers or employees; however, these individual initiatives carry no authority. The Board can only exercise authority through “one voice.”

As the public demands transparency, disclosure and accountability from its leaders, governance continues to evolve. Following are some likely future trends in governance:

• Governance training will be necessary because of the increasing complexity of the Board's role and stringent statutory requirements.

• Strategic recruitment of Board members will become more frequent as individuals with specific skills, expertise and knowledge are needed.

• Boards will be more aggressive in monitoring the financial and non-financial performance of the organization. Board members will be expected to use their experience and intuition to identify deficiencies and potential problems.

• Boards will be involved in the continuous evaluation of organizational leadership and developing succession plans; and identifying potential leaders with the correct blend of skills.

• Boards will be more aggressive in monitoring external trends, searching for emerging business opportunities, and identifying threats to the organization.

• Term limits and mandatory retirement will ensure that there is a turnover among board members to infuse new enthusiasm and ideas. Board member performance will be critically evaluated at regular intervals. The era of “ceremonial Board” appointments is over.

• Multiple board appointments will be discouraged so that efforts are focused on a few organizations rather than many. Conflicts of interest must be disclosed.

• The relationship between the Board and the CEO will be carefully defined and structured.

Excellence in governance is critical to the efficient operation of an organization and for competitive success. A capable, diligent,  knowledgeable and progressive Board will make good policy. Take the time to attend a Board meeting as an observer. Learn from these proven leaders. Observe the strategies and techniques that they use — you may be able to apply them in your own personal and professional activities.

Further Reading

Carver, M., and B. Charney. The Board Member’s Playbook. Jossey-Bass, 2004. ISBN 0-7879-6840-4.

Charan, R. Boards that Deliver. Jossey-Bass, 2005. ISBN 0-7879-7139-1.

Harper, J. Chairing the Board. Kogan Page, 2005. ISBN 0-7494-430006.

MacAvoy, P.W., and I.M. Millstein. The Recurrent Crisis in Corporate Governance. Palgrave MacMillan, 2003 ISBN 1-4039-1666-7.

Non-Profit Good Practice Guide: Governance http://www.npgoodpractice.org/Governance/

Terrance Malkinson is a proposal manager/documentation specialist; an elected Senator of the University of Calgary; an elected Governor of the Engineering Management Society; international correspondent for IEEE-USA Today's Engineer online; editor-in-chief of IEEE-USA Today's Engineer Digest; editor of the IEEE Engineering Management Society Newsletter; and editor of IEEE Canadian Review. He can be reached at todaysengineer@ieee.org