Rules of the board

Are you considering serving on the board of trustees or directors of a company?

If so, there are numerous factors to weigh beyond understanding fiscal responsibility and finding an organization whose mission you agree with and can champion. According to the Goodwin Group, there are 10 guidelines board members should follow.

1. Maintain independence from management and the CEO. You should hold the interests of the shareholders and other stakeholders as paramount. If you allow management to direct your activities as a board member, you may be ineffective. You have an obligation to ask questions.

2. Avoid interlocking board relationships. If you are a CEO, it’s unwise to sit on the board of one of your board member’s companies. It gives the appearance of cronyism and could suggest collusion. Independence is as much perception as reality.

3. Limit service to no more than two outside corporate boards. It will be impossible to find the time to adequately prepare yourself to be effective if you sit on more than two, in addition to your own.

4. Attend all board and committee meetings. You cannot absorb the details and nuances of management presentations on a conference call.

5. Don’t accept supplemental or contingency fees for services from boards on which you serve. It’s unwise and possibly unethical to allow the board to compensate you for rendering a service you are already being paid to provide as a board member.

6. Avoid conflicts of interest with your company and the boards on which you sit. For example, if you are the CEO of an adhesive manufacturing firm or you sit on the board of one, it’s probably not a good idea to sit on the board of a bandage company.

7. Help your board implement mechanisms of change, such as term limits and a mandatory retirement age. Corporations grow and thrive on new ideas and fresh thinking. If term limits are written into policy, it’s less difficult to replace members who have become ineffective or out of touch with the marketplace, capital markets and management trends.

8. Review governance policies and corporate codes of conduct. After your initial briefing and orientation as a new board member, read the materials provided by corporate counsel.

9. Work toward the appointment of a lead director who will have regular interaction with the CEO. The lead director’s responsibilities include listening to other board members and sharing thoughts regularly with the CEO. He or she also serves as a conduit of regular communication from the CEO to other board members between meetings.

10. Work toward establishment of a board peer review system and annual performance evaluations. This provides grounds to improve board performance and remove ineffective members.

On the Web

Understanding the nuances of serving on a board of trustees or directors can be difficult, but there are plenty of resources to help you navigate until you become more familiar with the process.

The Management Assistance Program for Nonprofits (www.mapnp.org/library/boards/boards.htm) offers the Toolkit for Boards on its site, which is packed with information, articles and links. The toolkit is designed to help nonprofit and for-profit boards with every aspect of the board. Among the dozens of links, documents and articles are topics such as:

* Board responsibilities and job descriptions

* Sample articles of incorporation, corporate bylaws, policies and resolutions

* How to staff, recruit and evaluate the board

* What makes a successful committee or board meeting

Also available is The Internet Nonprofit Center at www.nonprofits.org, which includes key facts, laws and instruction on board development and management.

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