What does it take to serve on a Board?

Board service is the oversight of a business, whether the company is non-profit or for-profit. A Board seat is a privilege to serve for the betterment of a business. The critical distinction between management of an organization and the Board is perspective. Clearly, management is responsible for the operation and financial success of the business. The Board is responsible for the oversite and should not be involved in the daily operations.

Board Responsibilities

What does a Board Position look like? I will break down the typical Board function and what to expect as a Board member.

Albeit there are many similarities between for-profit and non-profit Board operations. Both follow Board guidelines relating to meeting functions, meeting minutes, and voting policies that are supported by the business’s Operating Agreement or By-laws. Because most Boards require service on a committee as part of Board service, your business background will help determine the appropriate committee for you. Committee work will help you to understand the operations and how you can help to improve the business, which is a key element of Board participation. Attend meetings, ask questions relevant to the topics being reported on and provide input. Again, this is at a high-level and not on day-to-day issues.

Committee work

If you are on a committee, provide input and support for the committee, as required. Therefore, a CPA can serve on the audit committee. An HR specialist can be appointed to the executive review committee. A communications specialist can serve on the marketing committee. Certainly, the committee chair will provide you with the time required and the compensation commensurate with the time input.

Both For-Profit Boards and non-profit Boards are management oversight. Basically, they do not include managing the day-to-day business. Board members must review reports and ask questions of the CEO or CFO during the meetings. If the questions are sensitive in nature, let the CEO know what you plan to ask in advance. Your job is not to make running the business more difficult, but to help, with your area of expertise, at a high level.

Non-Profit
Service on a non-profit board generally requires a commitment of funds as well as time.

Financial:
Non-profit Boards typically require a give or get expectation. The amount of funds depends upon the Board and the organization. Some organizations have two levels of Boards, the voting, which requires the donation of funds by the Board member, or the ability to get funds from friends and family. The secondary level of Board members is non-voting and a lesser expectation of give or get. An excellent example of this is the Alzheimer’s Association, where the non-financial Board participates in advocacy or volunteer functions to support the organization but has no voting rights.

For-Profit

On a For-profit Board, businesses pay Board members for their service. There are a variety of ways this happens. Sometimes the payment is via a funding event, the company goes public and the Board member receives stock. Sometimes the pay is per Board meeting, and sometimes the pay is in both money and stock. The amount of committee work typically dictates the pay a Board member receives. The compensation varies from company to company.

Financial

Financial compensation or the give or get is primarily the difference in serving on a for-profit or non-profit Board.

A board member will be required to attend board meetings. The number of meetings on an annual basis varies and may be monthly, quarterly, or semi-annually. In addition to Board meetings, a board member should participate in committee work. Committees include the audit, the marketing, the compensation committee, or other committees to help the business operations.

Be Prepared: What does it take to serve on a board?

Each Board member must review the information provided by staff before the Board meeting. Typically, the reports require of time and effort by management, and no questions or comments about the information can be disappointing to the management staff.

What is expected of you as a board member?
Before the Board meeting, every board member is responsible to read the reports provided in advance. If I have a question that may embarrass or confuse a staff member, I will wait until I can ask the person responsible or the CEO for the answer privately. I learned this practice from one of my best board members in my company. When he questioned something he thought to be wrong in the financials or the marketing or operations report, he broached the question with the executive team before the board meeting. Then, when the question came up at the board meeting, the executive could respond appropriately. If there was a mistake, the executive had time to determine how to remedy the error.

On the Board versus In the business:

A vital component of any Board service is the distance a board member maintains from the business’s overall operation. Therefore, a Board member must not participate in the day-to-day operations, which is management’s responsibility. Basically, a board member who attempts to participate in the day-to-day operations will undermine management. Learn what it takes to serve on a board. RRO | Versions (robertsrules.org)

Board issues

When the Board feels there are serious management issues and that management is not performing, it is the Board’s responsibility to act and to replace management, if necessary. Therefore, if the Board must replace the CEO, the Board must find a replacement and ensure the business’s operation until a replacement is found.

Ask Questions; What do you need to serve on a board?

Board members must ask questions during the board meeting because it is vital for the oversite process. Of course, the questions should be respectful and appropriate for the Board room. It is frustrating for the executive team for the board members to be void of questions or comments on the material presented. Typically, the board reports require effort by the staff to put together the information, so read the information and provide feedback or questions.

Even experienced people say they have no value for a Board. However, those who have business experience can provide significant value. Every Board can benefit from good business experience, whether the business is for-profit or non-profit.

Roberts Rules of Order
Anyone who wishes to serve on a board can read Robert’s Rules of Order. Although it is boring, it provides important information about how a Board meeting is typically run. To learn the basic rules, order any of the books offered. See www.britannica.com/topic/Roberts-Rules-of-Order. There are a variety of options on https://www.Amazon.com

According to Wikipedia, the manual was first published in 1876 by U.S. Army officer Henry Martyn Robert. He adapted the rules and practices of Congress to the needs of non-legislative societies.
In 2005, the Robert’s Rules Association published Robert’s Rules of Order Newly Revised, In Brief. A third edition of the brief book was published in 2020.

Liability

As I have said, as a board member, you must know what it takes to serve on a board to assist in managing a non-profit or for-profit business. Unfortunately, when something goes wrong, and it is not addressed correctly, you can be liable as a board member. Ensure that your organization is covered by D & O insurance. An individual can also obtain insurance to protect themselves from claims. Because I am not an insurance expert contact your insurance broker if you have questions about your liability.

For more information about Board Service, please contact me at noel@ocgrowthadvisors.com. See: OC Growth Advisors – Your Partner for Success in Growth