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Board Governance Facts

Boards play three primary roles – to establish policies, to make significant and strategic decisions, and to oversee the organization’s activity. A well-written policy can help a board focus its efforts, avoid unnecessary effort and ensure the necessary (but often thin) distinction between management and oversight.

Effective boards must be able to recognize and address evolving mission-critical issues. This requires having full access to the most complete and accurate information that is available. This could include narrative reports on internal operations and programs, as well as narrative reports on expenditures and budgets. It is crucial that the board understands and can convey the message told by these numbers.

Board members must be able to discuss difficult and controversial matters even if it causes tension within the group. It’s important for directors to have the freedom to challenge one another and play a variety of roles on the board – the ruthless cost cutter, the damn-the-details big picture guy, or the split-the-differences peacemaker. The ability to play multiple roles allows directors to have a better perspective of the options that the board has.

Although it is commonly thought that good boards have board members with a significant amount of personal involvement in the business however, research suggests that this is not an indicator of quality. For instance the boards of failed companies and those of highly admired corporations had roughly the same number of outsiders. The key seems to be the process of the company’s strategy and risks, as well as the quality of dialogue.

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