One area that often causes problems for boards is determining the line between the responsibilities of the board and management.
There are entities where board micro-manage the business or rather crowding out the management from their given responsibilities. On the other hand, in few instances, the board becomes laid-back leaving the management to go over-board.
In order to achieve the right balance or ideal position, it is important to understand and communicate each others’ responsibilities. A board charter would be of much assistance in this instance.
An overriding principle is that the board is established to ‘set strategy and monitor performance’ not ‘manage’ the company.
Therefore the board addresses ‘targets’ and delegates to management the ‘means’ to achieve those targets.
nNouzab Fareed is the Fiji Committee Chair of the Australian Institute of Company Directors. He is also Fijian Holdings Limited Group chief executive.
To achieve the board’s desired corporate outcomes directors must:
nApproach their task with an open mind and not be constrained by entrenched views; bound by established procedures; or restricted to traditional operational processes. A common issue in Fiji and can be overcome with diversity of directors.
nBreakdown any adversarial relationship that might arise. If any to be disclosed prior to the meeting or prior to decision making.nTax Free Region Incentives
nAvoid using board meetings as an opportunity to criticise or attack management. This is not to say that performance should not be examined, however, the focus must be on what needs to be done to improve overall performance rather than dwelling on blame.
nAccept that they are individually accountable to the shareholders they represent on the board for the performance of the company. However, all directors should understand that they also jointly and equally share responsibility and accountability for the decisions and actions of the board.
nEnsure the performance of the company by clear and precise direction of management – by setting performance expectations and monitoring achievements against these.