When a corporate entity is created, state laws require that a
board of directors be established to assume accountability for its
operations. Boards represent the organization's owners,
stockholders for business entities and community stakeholders for
nonprofits. Boards are the agents of these owners and
provide the means to ensure that the corporate entity acts on the
While boards have accountability they have no
ability to perform the work of their organization. They
delegate these tasks and authority to those they select to manage
it by formulating policies that define the scope of management
Boards also have a fiduciary obligation to
the owners to ensure that the assets entrusted to the corporation
are used for legitimate purposes to accomplish its mission.
This obligation gives the board an oversight role.
legal obligations define the work of governance that only boards
can accomplish. Boards
of directors play a critical role in determining organizational
performance but the work they do is distinct and different from
the work of the organization they govern.
Board and organizational effectiveness suffer when there is
confusion between board work and management work. Effective
boards understand the work of governance and the need to plan,
organize, and carry out this work.