BOARD OF DIRECTORS

Governing body (called the board) of an incorporated

firm. Its members (directors) are elected normally by the
subscribers (stockholders) of the firm (generally at an
annual general meeting or AGM) to govern the firm and
look after the subscribers' interests. The board has the
ultimate decision-making authority and, in general, is
empowered to (1) set the company's policy, objectives,
and overall direction, (2) adopt bylaws, (3) name
members of the advisory, executive, finance, and other
committees, (4) hire, monitor, evaluate, and fire the
managing director and senior executives, (5) determine
and pay the dividend, and (6) issue additional shares.
Though all its members might not be engaged in the
company's day-to-day operations, the entire board is held
liable (under the doctrine of collective responsibility) for
the consequences of the firm's policies, actions, and
failures to act. Members of the board usually include
senior-most executives (called 'inside directors' or
'executive directors') as well as experts or respected
persons chosen from the wider community (called
'outside directors' or 'non-executive directors'). See also
corporate governance.

The Role of the Board of Directors

The board of directors, including the general manager or CEO (chief
executive officer), has very defined roles and responsibilities within the
business organization. Essentially it is the role of the board of directors
to hire the CEO or general manager of the business and assess the
overall direction and strategy of the business. The CEO or general
manager is responsible for hiring all of the other employees and
overseeing the day-to-day operation of the business. Problems usually
arise when these guidelines are not followed. Conflict occurs when the
directors begin to meddle in the day-to-day operation of the business.
Conversely, management is not responsible for the overall policy
decisions of the business.
The board of directors selects officers for the board. The major office is
the president or chair of the board. Next there is a vice-president of vicechair who serves in the absence of the president. These positions are
filled by board members. Next you usually have a secretary and
treasurer or combined secretary/treasurer. These positions focus on very
specific activities and may be filled by electing someone who is serving
on the board of directors or appointing someone who is not a member of
the board of directors. The selection process is often based on who is
willing and who is the most qualified, although seniority may come into
play. Each board may have their own ways of handling those issues.
The seven points below outline the major responsibilities of the board of
directors.
1) Recruit, supervise, retain, evaluate and compensate the manager.
Recruiting, supervising, retaining, evaluating and compensating the
CEO or general manager are probably the most important functions of
the board of directors. Value-added business boards need to aggressively

search for the best possible candidate for this position. Actively
searching within your industry can lead to the identification of very
capable people. Dont fall into the trap of hiring someone to manage the
business because he/she is out of work and needs a job. Another major
error of value-added businesses is under-compensating the manager.
Managerial compensation can provide a good financial payoff in terms
of attracting top candidates who will bring financial success to the valueadded business.
2) Provide direction for the organization. The board has a strategic
function in providing the vision, mission and goals of the organization.
These are often determined in combination with the CEO or general
manager of the business.
3) Establish a policy based governance system. The board has the
responsibility of developing a governance system for the business. The
articles of governance provide a framework but the board develops a
series of policies. This refers to the board as a group and focuses on
defining the rules of the group and how it will function. In a sense, its
no different than a club. The rules that the board establishes for the
company should be policy based. In other words, the board develops
policies to guide it own actions and the actions of the manager. The
policies should be broad and not rigidly defined as to allow the board
and manager leeway in achieving the goals of the business.
4) Govern the organization and the relationship with the CEO. Another
responsibility of the board is to develop a governance system. The
governance system involves how the board interacts with the general
manager or CEO. Periodically the board interacts with the CEO during
meetings of the board of directors. Typically that is done with a monthly
board meeting, although some boards have switched to meetings three to
four times a year, or maybe eight times a year. In the interim between
these meetings, the board is kept informed through phone conferences or
postal mail.

5) Fiduciary duty to protect the organizations assets and members

investment. The board has a fiduciary responsibility to represent and
protect the members/investors interest in the company. So the board
has to make sure the assets of the company are kept in good order. This
includes the companys plant, equipment and facilities, including the
human capital (people who work for the company.)
6) Monitor and control function. The board of directors has a
monitoring and control function. The board is in charge of the auditing
process and hires the auditor. It is in charge of making sure the audit is
done in a timely manner each year.

Companies Act, 1956

Sec 10E
Administration.

Constitution

of

Board

of

Company

Law

(1) As soon as may be after the commencement of the Companies

(Amendment) Act, 1988, the Central Government shall, by
notification in the Official Gazette, constitute a Board to be called
the Board of Company Law Administration.
(1A) The Company Law Board shall exercise and discharge such
powers and functions as may be conferred on it, by or under this
Act or any other law, and shall also exercise and discharge such
other powers and functions of the Central Government under this
Act or any other law as may be conferred on it by the Central

Government, by notification in the Official Gazette under the

provisions of this Act or that other law.
(2) The Company Law Board shall consist of such number of
members, not exceeding nine, as the Central Government deems
fit, to be appointed by that Government by notification in the
Official Gazette :
Provided that the Central Government may, by notification in the
Official Gazette, continue the appointment of the chairman or any
other member of the Company Law Board functioning as such
immediately before the commencement of the Companies
(Amendment) Act, 1988, as the chairman or any other member of
the Company Law Board, after such commencement for such
period not exceeding three years as may be specified in the
notification.
(2A) The members of the Company Law Board shall possess such
qualifications and experience as may be prescribed.
(3) One of the members shall be appointed by the Central
Government to be the chairman of the Company Law Board.
(4) No act done by the Company Law Board shall be called in
question on the ground only of any defect in the constitution of, or
the existence of any vacancy in, the Company Law Board.
(4A) Omitted w.e.f. 31st May,1991.
(4B) The Board may, by order in writing, form one or more
Benches from among its members and authorize each such Bench
to exercise and discharge such of the Board's powers and functions
as may be specified in the order ; and every order made or act done
by a Bench in exercise of such powers or discharge of such
functions shall be deemed to be the order or act, as the case may
be, of the Board.

(4C) Every Bench referred to in sub-section (4B) shall have

powers which are vested in a Court under the Code of Civil
Procedure, 1908 (5 of 1908), while trying a suit, in respect of the
following matters, namely :
(a) discovery and inspection of documents or other material
objects producible as evidence ;
(b) enforcing the attendance of witnesses and requiring the
deposit of their expenses ;
(c) compelling the production of documents or other material
objects producible as evidence and impounding the same ;
(d) examining witnesses on oath ;
(e) granting adjournments ;
(f) reception of evidence on affidavits.
(4D) Every Bench shall be deemed to be a civil court for the
purposes of section 195 and Chapter XXVI of the Code of
Criminal Procedure, 1973 (2 of 1974), and every proceeding
before the Bench shall be deemed to be a judicial proceeding
within the meaning of sections 193 and 228 of the Indian Penal
Code, 1860 (45 of 1860), and for the purpose of section 196 of that
Code.
(5) Without prejudice to the provisions of sub-sections (4C) and
(4D), the Company Law Board shall in the exercise of its powers
and the discharge of its functions under this Act, or any other law
be guided by the principles of natural justice and shall act in its
discretion.
(6) Subject to the foregoing provisions of this section, the
Company Law Board shall have power to regulate its own
procedure.

Board committees.
1. Establish committees when it's apparent that issues are too complex
and/or numerous to be handled by the entire board.
2. For ongoing, major activities establish standing committees; for shortterm activities, establish ad hoc committees that cease when the
activities are completed. Standing committees should be included in the
by-laws.
3. Committees recommend policy for approval by the entire board.
4. Committees make full use of board members' expertise, time and
commitment, and ensure diversity of opinions on the board.
5. They do not supplant responsibility of each board member; they
operate at the board level and not the staff level.
6. Committees may meet monthly (this is typical to new organizations,
with working boards), every two months, or every three months; if
meetings are not held monthly, attempt to have committees meet during
the months between full board meetings.
7. Minutes should be recorded for all board meetings and for Executive
Committee meetings if the ByLaws indicate the Executive Committee
can make decisions in place of the board when needed.

Developing Committees
1. Ensure the committee has a specific charge or set of tasks to address,
and ensure board members understand the committee's charge
2. Have at least two board members on each committee, preferably three
3. Don't have a member on more than two committees

4. In each board meeting, have each committee chair report the

committee's work since the past board meeting
5. Consider having non-board volunteers as members of the
committee (mostly common to nonprofits)
6. Consider having a relevant staff member as a member of the
committee as well
7. Committee chairs are often appointed by the board chair; consider
asking committees members for a volunteer for committee chair
8. If committee work is regularly effective and the executive committee
has a strong relationship with the chief executive, consider having board
meetings every other month and committee meetings between the board
meeting
9. The chief executive should service ex officio to the board and any
relevant committees (some organizations might consider placing the
chief executive as a member of the board -- this decision should be made
very carefully)
Potential Standing Committees
The following descriptions are intended to portray various functions
often conducted by standing board committees, i.e., committees that
exist year round. Note that the following list is not intended to suggest
that all of these committees should exist; it's ultimately up to the
organization to determine which committees should exist and what they
should do.
Potential Standing
Committees
Board Development

Their Typical Roles

Ensure effective board processes, structures and
roles, including retreat planning, committee
development, and board evaluation; sometimes

includes role of nominating committee, such as

keeping list of potential board members, orientation
and training

Evaluation

Ensures sound evaluation of

products/services/programs, including, e.g.,
outcomes, goals, data, analysis and resulting
adjustments

Executive

Oversee operations of the board; often acts on

behalf of the board during on-demand activities that
occur between meetings, and these acts are later
presented for full board review; comprised of board
chair, other officers and/or committee chairs (or
sometimes just the officers, although this might be
too small); often performs evaluation of chief
executive

Finance

Oversees development of the budget; ensures

accurate tracking/monitoring/accountability for
funds; ensures adequate financial controls; often led
by the board treasurer; reviews major grants and
associated terms

Fundraising

Oversees development and implementation of the

Fundraising Plan; identifies and solicits funds from
external sources of support, working with the
Development Officer if available; sometimes called
Development Committee

Marketing

Oversees development and implementation of the

Marketing Plan, including identifying potential
markets, their needs, how to meet those needs with
products/services/programs, and how to
promote/sell the programs

Personnel

Guides development, review and authorization of

personnel policies and procedures; sometimes leads
evaluation of the chief Executive; sometimes assists
chief executive with leadership and management
matters

Product / Program
Development

Guides development of service delivery

mechanisms; may include evaluation of the services;
link between the board and the staff on program's
activities

Promotions and Sales

Promotes organization's services to the community,

including generating fees for those services

Public Relations

Represents the organization to the community;

enhances the organization's image, including
communications with the press

Potential Ad Hoc Committees

The following descriptions are intended to portray various functions
often conducted by ad hoc board committees, i.e., committees that exist
to accomplish a goal and then cease to exist. Note that the following list
is not intended to suggest that all of these committees should exist; it's
ultimately up to the organization to determine which committees should
exist and what they should do.
Audit

Plans and supports audit of a major functions, e.g.,

finances, programs or organization

Plans and coordinates major fundraising event;

Campaign (nonprofit) sometimes a subcommittee of the Fundraising
Committee

Ethics

Develops and applies guidelines for ensuring ethical

behavior and resolving ethical conflicts

Plans and coordinates major events, such as

fundraising (nonprofits), team-building or planning;
Events (or Programs)
sometimes a subcommittee of the Fundraising
Committee

Nominations

Identifies needed board member skills, suggests

potential members and orients new members;
sometimes a subcommittee of the Board Development
Committee

Research

Conducts specific research and/or data gathering to

make decisions about a current major function in the
organization