Many small and medium sized business owners believe that they don’t need a board for their company, but nothing could be further from the truth. In fact, SMEs benefit even more from the experience and skills of a proper board than large ones, and by understanding the role of a board and its responsibilities you can add great value to your business while limiting your personal liability, too.
Company Law in the United Kingdom, which tends to set the precedent, is very similar to that in South Africa, Australia, New Zealand, and many other (primarily English-speaking) countries – certainly as regards Duties of Directors and the Role / Responsibilities of the Board. As a company director – whether by title or actions / responsibilities – it is imperative you understand these as your personal liability if things go wrong in the business can be unlimited.
So, what are the roles and responsibilities of a board, and how should they benefit your business?
The primary role of board is to direct the activities of the business in such a way that the interests of all stakeholders (not just shareholders, but employees, customers, suppliers and the community at large) are met.
This means it is responsible for, among other things:
- establishing the vision, mission, values (and, therefore, culture)
- the strategy of the business, and the structure necessary to support this, together with an appropriate framework of controls
- the appropriate management team for the business, delegating the implementation of the strategy to it and monitoring this
- full accountability to the shareholders with responsibility to the relevant stakeholders
There are many areas subordinate to these four that fall under the board’s purview, too, and it’s essential that the board members are familiar with their duties and responsibilities.
Issues to be discussed could include, in addition to vision / mission / values / culture, strategy, budgets and financial performance, risk and compliance, policy framework, performance reviews of the CEO and key staff as well as the board, succession planning, HR matters, operational matters, new corporate initiatives, governance and regulatory, and so on.
And then there are board committees. Boards can put together committees to provide in-depth assessment of various matters, with these committees reporting back to the board according to their terms of reference. Depending on the country regulations and the nature/size of the business, there may be a Social & Ethics Committee, an Audit Committee, a Risk Management Committee, a Remuneration Committee, a Nomination Committee, a Health & Safety Committees and a Treasury Committee, for example.
It should be clear from this that a proper board calendar needs to be utilised to ensure coverage of all the items necessary for that company’s board to be effective. Some items, such as financial performance, strategy and risk, need to be reviewed at every board meeting. Others might need to be looked at quarterly or even only annually. Let me know by clicking here if you would like me to send you a template example.
As you will appreciate, this is a comprehensive set of responsibilities and directorship is not a role to be taken lightly. Proper preparation for every board meeting is essential and accurate minutes of each meeting must be kept. It is also both good practice and strongly recommended that every board has independent directors – they not only can provide skills that might otherwise be missing, but valuable expertise from other industries, too, which can add a great deal of value to the board discussions.
Well governed companies have a significant advantage over others in terms of growth, profitability and value – is your board giving your business optimal advantage in these areas?
Perhaps the new year is a good time to evaluate your current board composition, skills and coverage. If you’d like a free 30-minute chat with me about your board, feel free to book a call with me here.
I work with successful owner-led businesses to enhance their growth, profitability and business value.
If you’d like to have a conversation about your business objectives and concerns, book a free 30-minute call with me here. I’d be delighted to talk with you.
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Other short posts on board-related matters you may find useful include:
- Why a Proper Board is Essential, Even for Small Businesses
- Post-Pandemic Business Upturn – Give Your Board Real Muscle
- Directors – Are You Risking Your Assets?
- Boards Accelerate Success & Increase Value for Small Companies, Too
- Proper Preparation for Productive Boards
- Board Meetings not Bored Meetings!
- Is Your Strategy Fit for Purpose?
- Why Even Small Companies Need Regular Board Meetings
- How Independent NEDs Can Catapult Growth in a Small Business
- Know Your Company Role(s)
- 1 Critical 5-Word Question for All Businesses