Corporations are required to have a board of directors. This is regardless of whether they are a for-profit or nonprofit entity. The reason is that the corporation must answer to its owners (stockholders or the public), who demand accountability of all actions, obligations and operations. If your board of directors does not act according to the bylaws of the corporation or run the organization with fiduciary responsibility, there may be civil and criminal action taken against you and your board members.
Members of the Board
Define the responsibilities of the board members in the bylaws. You should have specific board jobs, including president, vice president, secretary and treasurer. If you are joining the board of an existing company, ask for a copy of these bylaws so you are aware of your responsibilities. The bylaws describe not only the positions but also the role they play on the board. If you are a small corporation, you may be the owner, sole shareholder and all members of your board of directors. You may also request a mentor or respected family member to sit on the board if you want additional advice. Shareholders elect the board of directors in larger corporations. The board members are to ensure that the corporation is being run according the mission and bylaws of the corporate charter or articles of incorporation and must review operations and profits.
A company is, in its own way, a living entity. As the board, you may start with one mission and direction but then need to grow. You will adapt and change based on market reception, the economy or other factors. As the board, you make resolutions based on this information. These decisions may deal with contracts, new debt obligation or expansion. Place these items on an agenda so all board members have adequate time to review the propositions and offer any information in favor of or against their resolution.
Each board functions in its own unique way with personalities and expertise shaping the board dynamic. Your policies state how your board should formally interact. Create policies, part of the bylaws, that state when the board should meet and how issues should be presented. Guidelines should also state if the board should stringently follow parliamentary procedure or be more relaxed and informal. State what powers the board has as well as what the board must present to the shareholders to be ratified since the shareholders are the official owners of the company.
Every board of directors is accountable for acts that go against the charter of the company or improper management. As such, you need to properly document each board meeting. All votes need to be explained and the result noted. A board member should not lobby for things that are a clear conflict of interest such as endorsing a contract with a company he may have an ownership interest in. Maintain proper records and ensure that the taxes and state filings are done regularly. Notice must be given to the secretary of state where your corporation resides to list the board members and their contact information or any changes to that information.