Legally the board is required to ensure that a company succeeds in its mission, has a solid strategy and doesn’t run into legal or financial problems. The way boards fulfill their responsibilities is different and highly dependent on the circumstances.

Boards frequently make the mistake of becoming too involved in operational issues which should be left to management, or are not clear regarding their legal responsibility for decisions and actions taken on behalf of the company. This confusion is usually caused by boards not keeping up with the changing requirements on boards or the unexpected problems like financial crises and resignations of staff. Typically, this is addressed by allowing for discussion of the issues faced by directors, and by providing them with instructions and a simple set of documents.

Another common error is when the board over-delegates its authority and decides to not review the matters it has delegated (except in the case of the smallest NPOs). In this situation, the board loses the assessment function and cannot determine whether the operating activities contribute to the satisfactory performance of the organization.

The board should also create the governance structure, which includes how it will communicate with the general manager or chief executive officer. This includes determining how the board will meet regularly, the manner in which its members will be chosen and removed, and the manner in which the decisions will be made. The board should also create information systems that provide information on the past and future performance to aid in their decision-making.

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