Roles and Responsibilities
The bar has been raised for boards, their committees, and individual directors. Board deliberations are frequently focused on core questions: How can we function more effectively? What are the critical areas a board should focus on? Are we asking all the right questions and how do we maintain an oversight role without crossing the line into management?
The primary roles of the board include hiring and firing the CEO, planning for his/her succession, and overseeing the strategy set by management. Boards should also consider the following:
- Overseeing strategy and monitoring execution
- Board leadership and composition
- Executive succession and development
- Senior executive compensation issues
- Monitoring the quality of products and services
- Performance and financial viability
- Risk management, controls, and transparency
- Tone at the top, ethics, and compliance
- Stakeholder issues, including business sustainability in light of climate, energy, environmental, and other concerns.
Dig Deeper
Board Leadership
The Chairmen's Forum, an organization comprised of non-executive chairmen of boards of companies listed on exchanges in the United States and Canada, recently released a policy statement endorsing the appointment of an independent director as chairman after an incumbent CEO-chairman leaves. This endorsement comes at a time when 41% of S&P 500 companies split the positions of chairman and CEO (with 21% of S&P 500 companies having a truly independent chairman) according to research provided by the 2011 Spencer Stuart Board Index.
NYSE releases Report of the New York Stock Exchange Commission on Corporate Governance
According to an NYSE Euronext press release, the report, issued by the NYSE's Commission on Corporate Governance on September 23, 2010, "sets forth basic principles that will help guide issuers, investors and market participants, and provides a detailed history of the corporate governance changes that have occurred over the last decade, providing a framework for future debate.” The ten principles provided cover a range of areas, including "the board’s authority, management’s responsibility for governance and the relationship between shareholders’ trading activities, voting decisions and governance."
Guidebooks on Director Duties
Designed for board directors and exectuives, these guidebooks provide practical information and resources about their general duties as well as their obligations as they pertain to the regulatory environment and SEC reporting.
Fiduciary Duties and Other Responsibilities of Corporate Directors and Officers, Fourth Edition
Corporate Governance and Securities Laws: A Public Company Handbook, 2011 edition
Corporate Governance Handbook: Legal Standards and Board Practices (Third Edition)
Available for purchase from The Conference Board, Inc., this edition provides directors with information on a number of corporate governance areas, with a particular focus on risk management. It includes a set of tools for boards with sample corporate governance principles, committee charters, and assessment questionnaires.
Report of the ABA Task Force
Understanding D&O Insurance
The NACD article, "D&O Insurance Disputes: Twelve Things Directors and Officers Can Do to Protect Themselves", provides steps to help directors better understand how director and officer insurance policies work, including:
- Make certain that your business procures and keeps in force suitable D&O insurance policies
- Know your D&O insurance policies
- Stay current with the D&O insurance market
- Maintain policies and procedures for promptly notifying insurance companies of potential or actual claims, complaints, requests for money, administrative proceedings, and lawsuits
- Know what to do when a claim arrives
- Don’t change D&O insurance companies without first finding out what should be done to eliminate or minimize the risk of gaps in coverage
Related Reading: 20 Questions Directors Should Ask about Directors’ and Officers’ Liability Indemnification and Insurance