Business Core · Governance · Module
The board
Who oversees the business on the owners’ behalf: its composition, what it has reserved to itself, how its year runs and how it judges its own work.
The idea
How it works
A board has three jobs that are easy to name and hard to keep apart: setting direction together with management, overseeing how management performs, and accounting to the owners. The Cadbury Report of 1992 and the codes that followed it separated the chair from the chief executive and added independent directors largely so that the people being overseen are not the only ones doing the overseeing.
In a small firm the formal board is often the owners in a different role, and the real oversight, if any, comes from an advisory board. That can work well, provided everyone is clear that advisers advise and directors decide. An advisory board treated as if it carried authority produces advice nobody is obliged to take and decisions nobody is accountable for.
Working with it
In practice
- 01
Decide what the board keeps
A written list of matters reserved to the board. Everything not on it is delegated, which makes the list the working boundary of management’s authority.
- 02
Compose for the gaps
Map the skills the next few years require against those already present. A board recruited from the chair’s network tends to duplicate the chair.
- 03
Plan the year before it starts
Strategy, budget, risk, accounts, remuneration and succession each placed in a meeting, so none is squeezed out by whatever is urgent.
- 04
Evaluate the board as well as the business
Once a year, and with outside help every few years. Boards rarely volunteer that they are the problem.
One level in
The components of the board
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
Board charter
The board’s mandate in writing: its role, the matters reserved to it, its committees and how authority passes to management.
LearnBoard skills matrix
The capabilities the board needs set against those its members bring, used to decide the next appointment.
LearnAnnual board cycle
The year’s meetings, each with the standing items it must cover, fixed before the year begins.
LearnBoard evaluation
A periodic review of how the board works — composition, information, discussion and decisions — with the actions that follow.
Learn
If the board cannot name a decision it took that management would not have taken alone, it has been an audience.
The other modules in governance
Ownership
Who owns the business, in what shares and with what rights — and what the owners have said they expect from it in return.
LearnEnterprise risk
How much risk the owners will carry, which risks the whole organisation actually holds, and how the board keeps sight of the distance between the two.
LearnSuccession and exit
Who takes over the leadership and the ownership when the current holders step back, and by which routes the owners could leave if they chose to.
Learn