Governance – The Golden Key

By Denise Fandel, MBA, CAE, President and Co-Founder, Breakthrough Growth, LLC

While there is an art to governance, there is an accompanying body of knowledge that can deepen understanding about its fundamentals. Governance is the responsibility of any board of directors including those responsible for credentialing programs. While the executive director (ED) or CEO is a critical partner, the ultimate responsibility for governance rests with the board of directors. This article highlights the legal duties of board members and reviews the roles board members play in the governance of the organization.

Who the Board of Directors Serves

First and foremost, board members must remember that they serve as trustees. Board members should not act on behalf of themselves, on behalf of any specific group, or serve as representatives for a group such as industry. Board members serve as trustees of the organization/corporation. Merriam-Webster (n.d.) defines a trustee as “one (such as a corporate director) occupying a position of trust and performing functions comparable to those of a trustee.” 

The board, as a body, is legally responsible for actions of the corporation. Others may be accountable for duties or tasks, but the board remains legally responsible for work done in the name of the organization. Board members, whether called directors, trustees, commissioners or another synonymous term, must know that they are legally responsible and legally liable for adherence to fiduciary duties. Understanding fiduciary duties is a key part of governance.

Legal Duties

In performing their governance responsibilities, a board has three legal duties: care, loyalty and obedience. The duty of care is the most important fiduciary duty while requiring that directors act reasonably and in good faith in the best interest of the corporation. If a director acts negligently, does not attend or participate in the board’s deliberations and actions, or neglects his or her duties, the director risks personal liability. The duty of obedience requires adherence to the mission of the corporation, as set forth in the governing documents. The duty of loyalty requires that a director serve the corporation and not divert attention to competing interests.

A board must speak publicly about the organization and decisions of the governing body with one voice. Once a decision has been made, the board should respond to questions or complaints and communicate as a unit, generally through the CEO/ED, but also as a whole board. A member of the board who dissented from the decision of the group when the vote was held is compelled, by the duty of loyalty, to support the decision of the board in subsequent public forums or discussions outside of the boardroom.

Major Roles

The board has three major roles:

• Set direction.
• Ensure resources.
• Provide oversight on behalf of certificants, educators, employers and the public.

Direction

The first role of the board is setting the organization’s direction; developing and maintaining focus on mission and vision, delegating authority for the management of the organization and to articulate, safeguard, model and promote organizational values. When setting the strategic direction, the CEO/ED and selected senior staff should be involved in the discussion, but should not dictate the plan. The board must avoid the urge to micromanage the organization.

Determining the mission and purpose of the organization is the board’s responsibility. Strategic planning, strategic thinking and environmental scanning — the process that systematically surveys and interprets relevant data to identify external opportunities and threats that could influence future decisions — are continual processes. However, focused strategic planning sessions conducted by the board should occur at regular intervals. Boards and their members are not expected to have all the answers, but they should ensure that when they make decisions, those decisions are based on the best available evidence with adequate input from relevant stakeholders and in compliance with the organization’s purpose, mission and values. If needed, the board can bring in outside consultants and any additional information necessary to make decisions. At least 70% of the board’s agenda should consist of strategic discussions, not reports and operational items that are within the purview of staff.

Resources

In its role to ensure resources, the board develops policies about the generation of financial resources, ensures the necessary resources are made available to implement the mission and ensures the organization has the leadership needed at both the staff level and the board level. The board generally has direct authority over only one staff member: the CEO/ED. No individual board member, acting alone, has the authority to direct the CEO/ED; instead, the board should exert its authority as a unit. The board should delegate responsibility for managing, staff assignments, work hours and so forth, to the CEO/ED. The board establishes expectations for how the organization will function when it articulates its values. While the CEO/ED manages the staff and implementation of board strategy, the board is accountable for ensuring program integrity, compliance with standards and legal and ethical practice though its policies. The board should establish written expectations and guidance for the CEO/ED and staff based on the organization’s values to guide their actions and decisions. This allows the organization’s CEO/ED and staff to be nimble rather than having to obtain board approval for everything. Board policies should provide the high-level framework for the conduct of the organization.

Oversight

The board’s role of oversight rests in its polices, both financial and organizational, ensuring accountability with these policies, ensuring compliance with applicable laws and ethical standards, monitoring progress toward strategic goals and evaluating the outcomes. It is critical for the board to avoid micromanagement. The board is responsible for deciding where the organization is going and explaining why; staff are responsible for executing strategy in alignment with the organization’s values.

The Golden Key

When passionate, committed individuals come together with an emphasis on achieving the mission and vision of the organization, modeling the values of the organization through their work and demonstrating a strong board/staff partnership, governance becomes the golden key to unlocking the full potential of the organization.