Legally, boards are required to ensure that the organization succeeds in its mission, has a solid strategy and doesn’t get into legal or financial problems. However, the manner in which the boards participate in these responsibilities can differ greatly and is dependent on the situation of the business.
Boards frequently make the mistake of becoming too involved in operational issues that should be left to management, or are not clear about their legal liability for the decisions and actions taken on behalf of the company. This confusion is usually caused by a failure to keep up with the evolving demands on boards, or the unanticipated problems like financial crises and resignations of staff. Typically, this is prevented by scheduling discussion of the issues faced by directors, and by providing them with instructions and a simple set of documents.
Another mistake that is common is that the board over-delegates its authority and decides to not review those matters that it has delegated (except in the case of the smallest NPOs). In this case, the board loses the evaluation function and cannot decide whether the operations contribute to the satisfactory performance of the company.
The board should also develop a system of governance, which includes how it impacts on financial transactions it will work with the general manger or chief executive officer. This includes determining how the board will meet regularly, how its members will be selected and removed and how the board will make its decisions. The board also needs to develop information systems that can provide information about their past and anticipated performance to support their decision-making.