The Directors of an organization play the vital role of governing on behalf of the shareholders or members of that entity.
Various legislation outlines some of the legal duties each Director is to uphold during their tenure. However, there are many more laws and legal requirements (over 700) which Directors are personally liable for.
Outside these legal arrangements (see the legal requirements here), having behavior standards for your Directors is another good governance practice and it can help set high expectations from board induction onwards.
These standards should be publicly acknowledged by the Board to the organization’s constituents and all staff should be provided with copies of these standards for their own reference.
Setting behavior standards for Directors
Use the following as a sample of personal Director standards with which to inform and assess each Director on the Board. It can also be used for incoming candidates or volunteers. These are not legal requirements but offer the foundations for a well governing Board managed by responsible individuals, based on well recognized legal principles. I developed these many years ago, and have used them in, or introduced them to, countless Boards around the world.
Each Director should recognize and agree to uphold the following standards of behavior:
1. To take personal responsibility for contributing impartially to the decisions of the Board, with no thought given to personal gain.
2. To actively seek adequate knowledge about the business of the organization.
3. To provide positive input into the development of relevant organizational policy.
4. To provide strong support for the long-term strategies of the organization.
Download these duties as a print-out for your organization
5. To accept the need to sufficiently prepare for Board meetings and decisions, and to insist on sufficient information to enable informed debate and strategic decision making.
6. To perform the assignments delegated by the Board.
7. To delineate and state personal positions vs organizational positions on controversial matters to better enable the Board to make informed decisions for the betterment of the organization.
8. To devote sufficient time to the duties of a Director.
9. To uphold high ethical standards at the Board level.
10.To tender a resignation if unable to uphold any of the above Standards of Behavior
Why do Directors need to have their own set of personal standards?
The legally-based director duties are designed to promote good governance and ensure that each director act in the interests of the company's stakeholders.
Beyond its legal obligations, the board is responsible for setting the tone for ethical and responsible decision-making throughout the organization. This has a trickle down effect which impacts organizational culture and morale.
Every decision made by a board must be impartial and in the best interests of the organization. If a particular decision is likely to benefit a director in some way or benefit someone close to a director, that director is no longer regarded as impartial and is required to declare their interest. The Board then decides how best to deal with that declared interest.
What other personal standards are important for Directors to be aware of? Leave your thoughts in the comments below.