Legally boards are required by law to ensure that a company accomplishes its goals, has a solid strategic plan and doesn’t get into legal or financial problems. The way boards are required to fulfill these obligations varies greatly and is highly dependent on the circumstances.
Boards often make the mistake of getting too involved in operational issues that should be left up management or are unsure about their legal responsibilities for the decisions and actions taken by an organization. This confusion is often caused by boards not keeping up with the changes in demands on boards or unanticipated issues like financial crises and resignations of staff. Usually, this can be addressed by allowing for discussion on the challenges facing directors and providing them with an orientation and simple written material.
Another mistake that is common is that the board over-delegates its authority and decides not to review the matters it has delegated (except in the case of the smallest NPOs). In this case the board is unable to carry out its ability to evaluate and not be able to determine whether the operational activities are contributing to a satisfactory performance for the entire organization.
The board must also establish a governance system including how it interacts with the general manager or CEO. This includes the decision-making process for secure and efficient M&A data management the frequency of board meetings, how members will be selected and removed, as well as the manner in which decisions are made. The board should also create information systems that can provide information on the past and future performance to support their decision-making.