The importance of today’s board of directors cannot be minimized

The importance of today’s board of directors cannot be minimized

A corporate organisation should have an effective and experienced board of directors in order to succeed in business. Having an effective and experienced board is easier said than done as it is an uphill task to have one in place.  It takes time, effort and financial resources of an organization during the process of searching and engaging the candidates who meet the selection criteria. But what is an experienced and effective board member? In my view it is that    board member who has accumulated knowledge, experience, wisdom and insight in the area of business which is beneficial to the organisation. We should always remember that the board is hired for steering the organization forward.

Experienced and effective board members are highly compensated for their services to the organization and therefore cannot easily be afforded by small and mainly family owned organisations. It is however important to note that the benefits the organisation gets from an experienced and effective board are immense. The benefits of having an effective and experienced board are many and can be summarised as follows;

  • The board gives a strategic direction or vision of the organization
  • It sets the goals and evaluates performance against the goals
  • Ensures the organization is a good corporate citizen
  • It ensures a good risk management system is in place

The detailed roles of the board are as follows;

 Area  Detailed roles
1. Strategic direction
  • Establish vision, mission and values
  • Setting a moral tone at the top
  • Develops strategic and business plans
  • Sets goals and objectives
  • Selects, appoints, remunerates and evaluates the Chief Executive officer (CEO).
  • Establishes an effective organization
  • Enhances the organization’s public image
 2.  Sets a performance system
  • Sets annual budgets
  • Ensuring availability of right financial resources
  • Establishes policies including dividends policy
  • Fixes the remuneration system of board and staff
  • Reports on performance
  • Assesses and monitors performance
 3.  Compliance with the regulatory framework
  •  Sets up a legal and compliance unit
  • Appoints and remunerates  external auditors
  • Ensures returns to the regulatory authorities are made promptly
 4.  Establishment of risk management system
  • Puts in place a risk management strategy
  • Establishes a risk management committee of the board
  • Establishes an effective internal  control system
  • Selects and appoints head of internal audit

Conclusion

It may look quite expensive for an organization to engage an effective and experienced board if one does not look at the benefits which accrue to the organization as a result of having one in place.  Therefore do not dismiss the idea of an effective and experienced board on account of costs alone. You should weigh your costs against the benefits accruing to your organization.

Author: John Muhaise Bikalemesa

Director: Big Drum Advisory Services Limited

johnmuhaisebikalemesa@yahoo.com

About The Author

John Muhaise-Bikalemesa (JMB), is the founder of Muhaise.com blog and bigdrumassociates.com company. Learn more about him here and connect with him on his social medias below

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