The board of directors of any organisation is its governing body and should act in the best interests of the company, while at all times acting with integrity and behaving ethically.
While directors must work collectively as members of the board and in the interests of the company, they must equally be careful to avoid group-think and should encourage rigorous challenge and debate around the boardroom table.
Strategic direction
Directors are tasked with leading the organisation through establishing its vision, mission and values, setting strategy and determining the direction of the company, while ensuring that executive management effectively implements policies, strategies and plans and meets performance targets.
It is the job of the directors of a company to steer it towards the achievement of its goals and to safeguard its prosperity, while meeting the appropriate interests of its stakeholders, including compliance with regulatory and legal requirements.
While directors delegate authority to executive management for the implementation of strategy, they remain ultimately responsible for actions taken that may impact upon the company's prosperity and as such, the board must ensure that there is an effective oversight and monitoring system in place and that its internal controls are appropriate.
Reputation
An organisation's reputation is one of its most valuable assets and it is important that it is nurtured and protected. Reputation management should be fully integrated within the governance framework of an organisation and appropriate structures should be put in place to manage corporate reputation on an ongoing basis.
The board of directors, in conjunction with the Chief Executive, is responsible for setting the culture and values of the organisation and the ethical framework within which that culture exists. Directors are expected to set the tone of behaviour from the top. Behaviour that is at odds with an organisation's values and ethical framework will often have a negative impact on its reputation, particularly if such behaviour is evident amongst its leadership.
In order to effectively manage reputation, it is important for directors to consider and understand the impact of the board's strategic decisions, positive and negative, on stakeholders and the wider community. The strategy that an organisation pursues will have an influence on its corporate reputation and so directors must be mindful of the consequences, unintended or otherwise, of decisions taken at board level.
Accountability
The board of directors of any company should be held accountable for decisions impacting on the company's prosperity. Therefore, it is crucial that directors exercise care and diligence in relation to all decisions taken by the board.
The board of directors must ensure that communication both to and from shareholders and relevant stakeholders is effective and must understand and take into account the interests of shareholders and relevant stakeholders.
Directors, particularly non-executive directors, must ensure that they add value to a board by challenging the executive and encouraging constructive debate. It is not acceptable for directors to claim that they did not understand decisions taken by the board or that they were not aware of their legal responsibilities. The onus is on every director, on an individual basis, to ensure that they fully understand their legal responsibilities as a director.
Directors, both individually and collectively as board members, are expected to uphold the highest professional standards. All stakeholders of an organisation, including shareholders, employees, customers and third parties, such as regulators, must have confidence in the board of directors to act with integrity and to act responsibly.
Within a company, the board of directors is the principle agent of risk taking and enterprise. The board must simultaneously be entrepreneurial and drive the business forward while keeping it under prudent control. It is required to be sufficiently knowledgeable about the workings of the company to be answerable for its actions, yet able to stand back from the day-to-day management of the company and retain an objective, long-term view. It is expected to be focused on the commercial needs of the business while acting responsibly towards its stakeholders and society as a whole.
In leading an organisation, each board member should recognise the challenges of the role and ensure that they personally contribute to finding the right balance between the various competing pressures of being a director.
Maura Quinn, Chief Executive, Institute of Directors in Ireland.
