The importance of the board of directors cannot be overstated. They are critical to the success of an organization and ultimately responsible for its success or demise. Collectively they bear the legal responsibility to govern the organization.
The board of directors duties and responsibilities should be clearly defined. Each individual board member needs to fully understand what’s expected and needed of him or her, and be held accountable when they get off track. If you don’t know what the job entails, it’s impossible to do it well.
You can build a role-by-role version of this matched to your own board in 60 seconds, then download a free, editable copy to share.
Did you know? Board portal software helps new board members by centralizing access to materials, providing training resources, and facilitating collaboration, helping them become familiar with their duties and responsibilities.
What are the main functions of a board of directors?
There are 3 main areas that a board of directors focuses their work: governance, strategic direction and accountability.
1. Governance
Board governance is the framework that controls how the board is structured, how it operates and how decisions are made. For nonprofit organizations, understanding nonprofit board structure is essential to effective governance. It includes the processes, rules and systems to help boards understand their specific responsibilities among each member and committees, as well as guides how to best work with management.
2. Strategic direction
The board of directors help decide or at least inform how the organization grows. Board members who bring strong strategic experience in a broad range of industries can help the organization address opportunities and potential threats. Strategic planning should be done on an ongoing basis by the board and include both short and long-term goals.
3. Accountability
The board has a legal responsibility to provide oversight and accountability for the organization. They must ensure that all legal and ethical standards are followed and the organization is appropriately managing their assets and resources. One way to strengthen board accountability is through clear policies like board member term limits, which support ongoing renewal and governance effectiveness.
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Responsibilities of the board chair
The primary role of the board chair is to lead the rest of the board and act as a direct liaison between the board and management. Experienced board chairs know to perform their job well they need to stay in loop on all board activities and develop solid relationships with other board members, the chief executive, management, corporate secretaries and board committees.
Key responsibilities of the board chair include:
- Help the corporate secretary or person playing that role to write the agenda to identify top priorities and facilitate board meetings efficiently.
- Oversee board and executive committee meetings and empower the board to complete their duties.
- Keep board members actively engaged by participating in board member orientation, onboarding and development.
- Set the tone for board meetings to ensure there’s a respectful and collaborative environment for strategic planning and decision-making.
- Be willing to ask the chief executive officer or executive director difficult, probing questions to best guide the organization to fulfill its mission and goals.
- During times of crisis, work collaboratively with management to best steer the organization.
- Act as an alternate spokesperson for the organization.
- Coordinate and support the chief executive’s annual performance evaluation.
Responsibilities of board members
No matter what type of organization – non profit, private company or publicly traded – every board member shares some basic fundamental responsibilities, but their roles also differ.
Private company
All corporations must have a shareholder-elected board of directors. Private companies are not required to have a board of directors, but can adopt this form of management if they choose to do so. The primary difference between a private board of directors and a public corporate board is that the latter is responsible to the shareholders. Private companies are not legally obligated to fully disclose financial and operating information, so the board of directors may play an advisory role with less authority.
LLC
A limited liability corporation (LLC) does not have a formal board of directors. Instead, the owners of the LLC, act as an informal board of directors and are often referred to as a board of advisors. The owners play a natural executive oversight role for the LLC because of their financial interest in the company.
At a bare minimum, all board members, regardless of the type of organization, must:
- Attend all board and committee meetings and functions such as special events.
- Review agenda and supporting materials prior to board and committee meetings
- Be informed about the organization’s mission, services, policies, and programs
- Keep tabs on the organization’s industry including competitors
See this related post: The ex officio board member role explained
The top 5 responsibilities of the board of directors:
1. Organization strategic planning and monitoring
The board may be responsible for creating and reviewing the mission and purpose statements that articulate the organization’s goals, means, and primary constituents served. Boards must actively participate in an overall strategic planning process and monitoring of the plan’s goals. As part of this, they may also monitor the organization’s programs and services to determine which are consistent with the organization’s mission and monitor their effectiveness.
2. Protect assets and provide financial oversight
Boards need to ensure that they’re protecting the organization’s assets and managing them responsibly, including carrying out its fiduciary responsibilities. For example, a board should work with the chief financial officer to establish a budget, ensure proper controls are in place for incoming and outgoing funds and review the organization’s financial statements. This may also include establishing an audit committee and completing an internal audit every year.
3. Serve on committees or working groups
Board members should serve on committees or task forces and offer to take on special assignments, as this is where the bulk of board work gets done. Example committees include governance, finance, executive and audit committees. Boards can also create ad hoc committees or working groups to accomplish specific goals or tasks.
4. Select, support and review performance of the chief executive
The board is responsible for vetting and selecting a qualified candidate for the CEO or executive director to run the day-to-day management activities of the organization. Once appointed, the board will collaboratively work with the chief executive to meet the organization’s short and long-term plans. On an annual basis, the board of directors is also responsible for evaluating the performance of the CEO. The bulk of this work is most likely done through a committee, in which they will present their findings to the full board.
5. Board member recruitment and board performance evaluation
The board is responsible for recruiting, nominating and appointing new board members with the right mix of skills, knowledge and experience. Most boards assess their performance on an annual basis to identify gaps and form a strategic plan. An important topic for today’s boards is to address diversity and inclusion in their board recruitment and selection. Strong governance depends on intentional board diversity, which brings broader perspectives to key decisions.
For new board members, it may be helpful to provide a quick list of their core roles and responsibilities. See this checklist from BoardSource.
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Legal responsibilities for nonprofit board members
Nonprofit board members have additional legal responsibilities. They must meet three standards: duty of care, duty of loyalty and duty of obedience. In the US, there are several states that have statutes adopting a variation of these duties to use in court to determine whether a board member acted improperly.
Duty of care
Duty of care relates to the level of competence expected of a board member. A board member is expected to exercise reasonable care when he or she makes a decision as a steward of the organization.
Duty of loyalty
The duty of loyalty represents a standard of allegiance to the organization. A board member must act in the best interests of their organization and never use information obtained as a member for personal gain.
Duty of obedience
The final standard requires board members to act consistently towards the organization’s mission and central goals. This duty requires board members to obey the law and the organization’s internal rules and regulations.
In addition to these legal responsibilities, non-profit board members are often expected to actively network or advocate on behalf of the organization. This could include identifying new business opportunities or opening doors for the organization to achieve their mission.
See how nonprofit boards use Aprio to keep duty of care, duty of loyalty, and duty of obedience documented across cycles.
Who should not serve on a board of directors?
Generally speaking, board members should be independent to the organization, unrelated to each other and hold no conflict of interests. As many professionals desire to work on boards that align with their personal and professional interests, it’s important to evaluate any potential personal or financial conflicts of interest that could compromise your judgment.
You should only accept a board member position if you can:
- Commit your time. Carefully review your schedule and consider if you can fulfill all of your board obligations. This includes attending board meetings, contributing productively, reviewing board materials in advance and following through on assigned tasks.
- Maintain integrity. At all times, you must exercise integrity as a board member such as maintaining confidentiality regarding sensitive matters.
- Welcome diverse views. With many voices and perspectives, there’s bound to be conflict from time to time. As a board member, you should make a conscious effort to actively listen, participate in discussions productively and respectfully communicate with all board meeting participants.
Some boards include members by virtue of their office — known as Ex officio members.
Who is more powerful, the CEO or the board of directors?
The CEO or executive director is the top senior executive over management and has a major impact on the success or failure of a company. But the board of directors arguably may have more power than the top chief executive. This is because the board is ultimately responsible for reviewing the performance of the CEO and if a new candidate is needed, they are responsible for vetting and selecting the candidate.
But each role has a unique impact on the organization. Think of it this way: the board of directors operate like the pilot of a jumbo jet at 30,000 feet level to oversee the big picture and make the adjustments as needed. The CEO operates like the pilot of a Cessna plane at the 2,000 feet level. Employees and volunteers of the organization operate on the ground, like the drivers of transport trucks completing the needed deliveries and pickups.
Keep every role accountable, meeting after meeting
Aprio gives your board one secure home for agendas, materials, votes, and the reports that show who is responsible for what.
Frequently asked questions
What does a board of directors do?
A board is the governing body with ultimate legal and ethical responsibility for an organization. Its core job is to set the mission and strategy, hire and oversee the chief executive, make sure the money is there and properly controlled, monitor the organization’s programs, and protect its legal and ethical integrity. Put simply, the board governs and oversees while management runs the day to day.
What are the three fiduciary duties of a board member?
Board members owe three duties: the duty of care (make informed decisions with the diligence a reasonably careful person would use), the duty of loyalty (put the organization’s interests ahead of your own and disclose conflicts), and the duty of obedience (follow the law, the bylaws, and the mission). Canadian statutes like the CBCA and CNCA frame this as care and loyalty plus a requirement to act within the corporation’s stated objects, which covers the same ground.
What is the difference between the board and management?
The board governs and management executes. The board sets mission, strategy, and policy, approves the budget, and hires, supervises, and evaluates the CEO or executive director. Management runs daily operations and reports back to the board. When directors start doing management’s job, that is micromanagement, and it usually means the oversight is not getting done.
What is the difference between a director and an officer?
Directors govern the organization and owe their fiduciary duties to it as members of the board. Officers (the chair, secretary, treasurer, and often the executive director) are appointed to carry out specific functions within the authority the board grants them. One person can hold both roles, but the two are legally distinct.
What is an individual board member responsible for?
The board acts as a body, but each director is expected to prepare for and attend meetings, stay current on the mission and the finances, serve on a committee or two, and follow the conflict-of-interest and confidentiality policies. No single director can act alone or direct staff. The board can delegate tasks, but it cannot delegate away its responsibility to oversee.
Can a board member be held personally liable?
It is possible, but the protections are strong when directors act in good faith. In the US, the federal Volunteer Protection Act and many state laws shield unpaid directors from liability for ordinary negligence, and the business judgment rule protects informed, good-faith decisions. Most organizations also carry directors-and-officers (D&O) insurance and indemnify their board. None of this covers willful, reckless, or grossly negligent conduct.
Do Canadian directors have the same duties?
Yes, the core duties are essentially the same. The CBCA and the Canada Not-for-profit Corporations Act (CNCA) require directors to act honestly and in good faith in the best interests of the corporation, and to exercise the care, diligence, and skill of a reasonably prudent person. Canadian directors can be personally liable in specific situations, such as unpaid wages or certain unremitted taxes, with a due-diligence defense if they acted reasonably.