Board Evaluations

"A Necessary Corporate Governance Function"

Back in 1971, Ray Bauschke and Kent W. Francis released their book titled, “A Focus on Power.” the book provided a comprehensive treatment of the legal, fiduciary and policymaker roles of board members. Although the book is out of print, the principles it exposed are as relevant today as they were then.

The word “board” is important. Individual directors of organizations or corporations do not have any legal power to act independently, unless so authorized by the board of directors. It is the board, meeting as a whole that can exercise power. It is critically important to understand this legal distinction. The five key board functions are as follows:

Function #1 The board determines the business direction of the corporation. (Goals, objectives and strategic business plan, business model).

Function #2 The board sets the policy for the corporation. (Policies are principles upon which any measure or course of action is based, having regards to both the ends aimed at and the means used to arrive at them).

Function #3 The board is responsible for hiring, rewarding, appraising, disciplining, and even dismissing the President/CEO. (The CEO is accountable for implementing corporate policy, for employing all other staff and for achieving the business goals and operating results of the corporation).

Function #4 The board appraises or evaluates the results.(The board regularly reviews management reports and financial results. External auditors and in some instances, regulator provide additional perspectives on the sound business and financial practices of the corporation).

Function #5 The board is accountable to the owners for its stewardship. (Except for privately held corporations, public disclosure of operating results is required. Most corporations publish annual reports and hold annual shareholder meetings at which time the board reports on operating result and director election).

Since the Sarbanes-Oxley Act of 2002, most Boards customarily evaluate themselves as part of Function #4 considering an annual board performance evaluation as a “best corporate governance practice.” Director Online© Performance Appraisal System available from Bauschke & Associates (www.bauschke.com) provides your organization with the mechanics and process for conducting all of your board evaluations (entire board, board committee, and individual board member) within the safe and secure environment of one software program.

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