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Board Of Directors Governance

When a corporate entity is created, state laws require that a board of directors be established to assume accountability for its operations.  Boards represent the organization's owners, stockholders for business entities and community stakeholders for nonprofits.  Boards are the agents of these owners and provide the means to ensure that the corporate entity acts on the owners behalf.  

While boards have accountability they have no ability to perform the work of their organization.  They delegate these tasks and authority to those they select to manage it by formulating policies that define the scope of management responsibility.  

Boards also have a fiduciary obligation to the owners to ensure that the assets entrusted to the corporation are used for legitimate purposes to accomplish its mission.  This obligation gives the board an oversight role.  

These legal obligations define the work of governance that only boards can accomplish.  Boards of directors play a critical role in determining organizational performance but the work they do is distinct and different from the work of the organization they govern.  Board and organizational effectiveness suffer when there is confusion between board work and management work.  Effective boards understand the work of governance and the need to plan, organize, and carry out this work. 

Symptoms of inadequate board governance

  • Board meddling in operational matters.

  • Board members assuming operational authority.

  • Ineffective board meetings with no meaningful agenda.

  • Board agendas dealing with operational problems rather than strategic issues.

  • Nonfunctioning board committees.

  • Difficulty recruiting board members and selecting board officers.

  • Poor attendance at board meetings.

  • Board identifying with the needs of the management staff and the organization rather than the owners.

  • Management, rather than the board, setting direction for the organization.

Three Sigma's services

We conduct retreats, workshops, and seminars for boards of directors including follow-up coaching.  These learning activities coach board members how to:

  • Plan, organize and accomplish the work boards must do to effectively govern their organizations.
  • Formulate policies which provide direction, delegate responsibility, and provide a framework for decision making.
  • Use systems theory to make better strategic decisions.
  • Develop a governance information system to provide the information needed to discharge their oversight role.
  • Organize standing committees to enhance the effectiveness and efficiency of the board.

The following model is available on this website to help board members plan and organize the work of their boards.

Expected results

  • Improved organizational performance resulting from the alignment of the responsibilities and tasks of owners, boards, and management.

  • Boards performing governance work and appraising their own performance.

  • Efficient, productive board and committee meetings.

  • Enthusiastic, committed board members willing to participate in board activities.

  • The scope of management authority and decision making is clearly defined and understood which eliminates unnecessary board involvement in operational decisions.

  • Boards focusing on long range, strategic issues and decisions.

Copyright 2002 Three Sigma, Inc.