Board Governance: Functions, Duties, and Effective Leadership

Introduction

In order for an organization to achieve good outcomes, its board should be characterized by good governance. Good governance often includes characteristics such as accountability, diversity of representation in the boardroom, the ability to develop a consensus view, transparency, application of the rule of law, and an understanding that the board bears responsibility to both shareholders and stakeholders. Essentially, boards are complex, but they exist for a simple reason — to ensure an effective organization (Bowen, 2008). This paper explains why boards are needed, what their functions are according to Bowen (2008), what boards should consider in effective governance, what their basic duties are and why they are important, how CEO and board roles relate to effective leadership, the importance of the Sarbanes-Oxley Act, and the key aspects of board machinery.

Why Boards Exist

Boards are most valuable when they are comprised of individuals who provide expertise and guidance for organizations that lack direction, experience, and insight. Bowen (2008) explains that a board can help an organization develop a shared sense of purpose as well as social, economic, and political contexts for examining tough decisions that the organization must make. The board represents a collective of responsible agents that can give checks and balances to an organization by supplying judgment and protecting against self-interest.

Additionally, both non-profit and for-profit organizations can benefit from having boards to provide oversight, particularly for regulatory purposes. The corporate form of organization provides certain legal protections, and boards are a requirement for corporate organization. For the sake of organizing and legal structure alone, the board is a key component for success.

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