We find that most of clients who are first time business owners prioritise board meetings as control function, those who have learned lessons from mistakes of the past take a different view but sometimes get confused between their roles as shareholders, directors or senior managers reporting to the board. So I thought I would put together this brief summary to help.
What is a board of directors? The board of directors fiduciary responsibility is to act in the best interests of the shareholders by protect the shareholders' assets and do everything reasonable to ensure shareholder receive a return on their investment. The activities of the board in this regard may be:
Appointment and recommend remuneration of a CEO / General manager / Key Executives
Define company strategy and approve initiatives to achieve
Approval of material transactions proposed by the CEO/GM
Recommend or strongly discourage capital transactions such as joint ventures, acquisitions, disposals or mergers.
Approve the company's financial statements, and
Ensure adequate controls to mitigate the risks to the business are in place and effective through internal reporting and/or external audit.
How does it work? The evidence of the board fulfilling its duties comes in the form of minutes of board meetings. These are meetings where the board reviews the information it has requested and makes appropriate resolutions.
So what goes into a a board meeting? the answer to this is "enough" for the board to make informed decisions. Here are some ideas:
Agenda
Minutes from previous meeting (to be approved)
Business update
Financial performance and position
Market conditions / competitor news
Progress with key initiatives
Team news
Non financial KPIs
Who can attend? Anyone the board feels is necessary to provide or explain the business of the company sufficiently for them to have understood and make informed decisions.
Why does anyone do it? The process of holding board meetings and evidencing informed decisions gives the company's current and future shareholders and those providing finance comfort in the way the company is run that cannot easily be otherwise provided. The process also reduces the liability on the directors themselves of having anything happen on their watch that they were not aware of (but are responsible for).