1.

18 Role of the Board of Directors

Board of Directors
A board of directors consists of elected individuals who serve as advisors to a
corporation and act as representative for shareholders. Both for-profit and nonprofit
corporations as well as some government agencies have a board of directors. Boards
guide the success or failure of a company by steering the overall corporate direction,
setting policy, choosing executives, and ensuring that major decisions are ethical and
prudent. They make a commitment to building the mission and vision of the company,
ensuring it is carried through all areas of the organization.
Boards and managers don’t agree on everything but they both agree that they need
a strategic plan. One thing that they don’t always agree on is how to clarify the role of the
board and the role of management in developing and implementing the strategic plan.
The central question is who sets the strategy. Some believe the board sets it and some
believe the board waits for management to set it so they can approve it. The actual
process can vary substantially from one company to another. The important thing is to
agree on the process and ensure that it gets done. A board management software program
is the most secure way for boards and managers to collaborate on the corporate strategic
plan and the expectations for the role of the board of directors in strategic management.
Board directors and managers are equally concerned about where each of them draws
the line between managing strategy and managing the company. The board is ultimately
responsible for strategic planning. In recent years, they have been under strong pressure
to have ready answers about strategy for shareholders, regulators, and others when
corporate performance is lacking.
There are several ways that boards can participate in activities related to strategy
without micromanaging the CEO or overstepping their role. The strategic plan
should align with the company’s vision, which means those two topics should be items
on the agenda at least a few times a year. In preparation to have a board discussion about
strategy, board directors should collect and analyze data related to the industry’s
environment, the nature of the competition, and the business models.
Boards can also develop a platform for strategic decision-making that defines the
fundamentals of the business portfolio and the dominant business model that will help
determine the future allocation of resources and capabilities. The board’s role in strategic
planning entails identifying priorities, establishing goals and objectives, finding
resources, and allocating funds to support the decisions that need to be made around
strategic planning. The board is also responsible for monitoring the execution of the
strategic plan. This requires the board to oversee the implementation of the strategic plan.
As the plan progresses, boards may need to revisit the allocation of funds, as well as
consider the impact of acquisitions and divestitures. 
Low Degree of Involvement in Strategic Management High
(Passive) (Active)
Phantom Rubber Minimal Nominal Active Catalyst
Stamp Review Participation Participation
Never knows Permits Formally Involvement Approves Takes the
what to do, officers to reviews to a certain questions, leading role
if anything; make all selected degree in the and makes in
no degree of decisions. It issues that performance final establishing
involvement. votes as the officers of review of decisions on and
officer bring to selected key mission, modifying
recommend attention. decisions, strategy, the mission,
on action indicators, or policies, and objectives,
issues. programs of objectives. strategy,
management. Has active and
board policies. It
committee. has a very
Performs active
fiscal and strategy
management committee.
audits.

Specific Role of the Board of Directors

1. Monitor
By acting through its committees or being a part of the management team,
the board can keep abreast of developments inside and outside the corporation,
bringing to management’s attention development it might have overlooked. A
board should at least carry out this task.
2. Evaluate and influence
A board can examine management’s proposals, decision, and actions;
agree or disagree with them; give advice and offer suggestions; and outline
alternatives. Active board performs this task in addition to the monitoring one.
3. Initiate and determine
A board can delineate a corporation’s mission and specify strategic
options to its management. Only the most active boards take on this task in
addition to the two previous ones.