Board of Directors Spring Tune Up

Board of Directors Spring Tune Up

Spring is here.

We have found that this is a great time of year to look at some of the basic agreements or policies that make a Board of Directors effective. These agreements/policies are often called Board of Director or Committee charters. What is a charter?

A Board of Director or Committee charter is a document or understanding that outlines the specific roles and responsibilities of the Board or Committee vis-à-vis executive management, ownership or another Board Committee (i.e.: simply stated: On what issues will they vote or have final authority?). For example, it may be the province of the full Board or its Compensation Committee to set the compensation level of the CEO but the CEO will then be authorized to set the compensation level for all other officers and employees—without Board approval of each employee’s package.

Do a spring tune-up of your Board charters this year by asking these three questions—

  1. Is there a written document and understanding (a charter) that clearly outlines the role and responsibility of the full Board and its Committees? If not, get out your pen.
  2. If so, is the charter up-to-date and reflective of both current practices and shareholder governance and control expectations?
  3. Do yourBoard or Committee charters contain responsibility for—
    1. Risk management and prudent balance-sheet architecture;
    2. Approval of CEO and officer compensation;
    3. Succession planning;
    4. Articulating a 5-year vision for the enterprise;
    5. Exposure to competitor actions and governmental regulation; and
    6. ………(choose yours)

We believe it is prudent for the Board Chair to conduct or assign such a tune-up every other spring. If it hasn’t been done recently, there is no time like the present.

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