Board Governance Principles

In the corporate world, directors are statutorily mandated to act in the best interests of the corporation. There has been some recent debate concerning the time horizon over which such best interests are measured, but generally there is legal precedent that sets out what behaviour is expected of corporate directors.

In Member-Based-Organizations (MBOs), while directors must surely act in the best interest of the organization, depending on whether there is a representative nature in the selection of directors, other interests may be validly considered.

In any board of directors there is a principle of oversight of management. The board is charged with review of management’s actions to determine how the organization is performing. Often the review will be compared to what the plans are for the firm. Therefore it is necessary, with even the most grass-roots organization to engage in some sort of annual planning process. In more sophisticated organizations, an elaborate business plan may be developed by management and used by the board to gauge the performance of the MBO.

Many principles of corporate governance can be adapted for boards of MBOs.  Caution should be used to make sure the policy adopted fits the organization.  For example, as the organization has more volunteers and fewer staff, the planning process will be less elaborate but it is wise for the governance of the organization to at least have a budget predicting sources of income and expenditure in addition to identifying possible reasons why there might be a deviation from the predictions.

No matter how directors are selected and what political divisions may exist in the quest to be representative, those must be put aside in order to work together to accomplish the common goals of the organization.

Much has been written in the corporate sphere about how board members should behave in order that boards are effective at governance of the organization. The absolute first principle must be respect for fellow board members.