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The board of directors holds significant influence within a company, setting strategic goals and overseeing management’s execution of corporate objectives and initiatives. We explore the common board member responsibilities, duties, and roles in the boardroom.
Within every corporate board, there is a range of different roles and responsibilities among the directors. Below are some of the common board member roles.
As the elected leader of the board, the chairperson sets the goals and objectives with the other board members and ensures they are met. The chair also creates the agenda and presides over board meetings, ensuring that timely, relevant, accurate and accessible information is provided to the board to enable directors to reach an informed decision.
The vice chair supports the board chair in the execution of their duties and fulfills the chair’s duties should they be absent. The vice chair also serves on committees.
A corporate secretary is essential to a well-functioning board. The corporate secretary schedules board meetings, assures that an agenda is set and oversees the distribution of necessary materials for meetings. The corporate secretary is also responsible for preparing the board meeting minutes, as well as recording any motions, votes and decisions.
The board treasury handles the company’s finances and makes important decisions regarding spending and investing, managing the board’s oversight of financial responsibilities. This includes reconciling accounts, producing financial statements, ensuring tax-related documents and legal forms are filed in a timely manner and reviewing the annual audit.
As a member of a public company board, all directors have a fiduciary duty to protect not only the company and its investors but also its employees, suppliers, and customers. The following laws guide the conduct of directors.
Under the General Corporation Law in Delaware, where many public companies are incorporated, duty of care requires directors to make informed business decisions based on all available material information. According to John Zecca, Chief Legal and Regulatory Officer at Nasdaq, and Joan Conley, Senior Advisor on Corporate Governance and ESG Programs at Nasdaq, a director must be able to commit to their role fully and become engaged with the company. A director must also devote the time and the care to ask questions and feel empowered to weigh in on business decisions.
Duty of loyalty, on the other hand, requires directors to act in good faith to advance the best interests of the corporation and to refrain from conduct, such as self-dealing, that harms the corporation. Some of the essential elements for directors to learn about the duty of loyalty are identifying perceived conflicts and having a process in place at the board level to communicate those conflicts with the corporate secretary and the general counsel, receiving guidance and potentially recusing oneself if necessary.
“It's an attempt by the law to create a structure that encourages what we all know are just good principles for life—things you would expect if you were doing it yourself,” according to Zecca and Conley. “If you are loyal, if you have care, then you will exercise care. You are more likely to contribute to overseeing a well-run organization.”
Meanwhile, duty of obedience requires every board member to adhere to the company’s by-laws and mission while also complying with state and federal laws.
While duty of care and duty of loyalty establish essential obligations for directors when making business decisions, the business judgment rule helps to ensure that directors act in the best interest of the company and its stakeholders. At the center of Delaware General Corporation Law is the business judgment rule, which affords directors making business decisions a set of presumptions that, so long as a majority of the directors have no conflicting interest in the decision, their decision will not later be second-guessed by a court if it is undertaken with due care and in good faith.
While board member duties may vary based upon the company’s industry or sector, boards are often unified in several common board member responsibilities, from establishing the company’s vision and overseeing financial management to recruiting and onboarding new members and resolving conflicts of interest. Directors serve as the primary oversight for a company’s management team, ensuring that they execute strategic initiatives that align with the corporate purpose while maintaining legal compliance and integrity. Board members also help manage the company’s reputation and determine how to best handle resources, which could include adopting new technologies.
Even though board members may serve on different committees, such as the audit committee or nominating and governance committee, ensuring that the company is operating efficiently and effectively and making progress toward its strategic goals is the top priority for all directors.
Nasdaq Governance Solutions
Boards need reliable solutions—and people—to facilitate major decisions, advance strategic vision, and drive stakeholder value. Nasdaq Governance Solutions provides a suite of board technologies that enable boards and leadership teams to work at peak performance.
We have received your request and will soon be in touch to schedule your time with an advisor. Nasdaq looks forward to helping you advance your governance efforts.
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