CEO and the Board

A basic tenet of good governance is that the Management and Governance be kept separate. A line of distinction between the Governance and the Management should be demarcated in terms of their roles and responsibilities. The responsibility of the Board is to steer the organization in the right direction in order to attain its vision & mission. It is a known fact that Board members do not meet the staff on every day basis and members may not reside nearby. Further, the Board members are also working professionals in their respective fields and meet four times a year (ideally) or as stated in the byelaws. All these practical constraints can make one doubt as to “how can the Board then take critical decisions for the organization?”. This is where the crucial role of the Chief Executive Officer (CEO)/Chief Functionary comes in.

How does the CEO support the Board? What roles are ideally delegated by the Board to the CEO while they provide oversight? Further, how can the Board hold the CEO accountable, what control mechanisms should be in place to ensure this?

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9 thoughts on “CEO and the Board

  1. My wife and i got so joyful that Michael managed to complete his inquiry via the ideas he acquired through the web page. It’s not at all simplistic to just happen to be releasing guidelines other folks have been making money from. And we know we need the website owner to appreciate because of that. These explanations you made, the simple site menu, the friendships you can help instill – it is all terrific, and it’s leading our son in addition to us reckon that that issue is satisfying, which is certainly rather mandatory. Thanks for all the pieces!

  2. Enlisted good governance is always ensures an effective distance between the Governing Body and the Managing Body based on their roles and responsibilities. The responsibility of the Board is to giving the right direction to the Organization to attain its vision and mission. In that pursuit the Governing Body ensures no deviation from the objectives and the aims of the Organization. In turn the Managing Body always keep working towards the implementation of the values and the defined policies of the Organization intact. The ethos of the Organization is kept alive, when the Manging Body strives together in ensuring by executing the decisions of the Governing Body. The day to day management of affairs belong to the Manging Body. The Governing Body has to keep its safe distance and adheres its respect without meddling with the day today affairs of the Organization and having direct links with the employees. Hence the employees are related only to the Management and the Management represents the needs and issues of them in the Governing Body.

  3. The CEO acts as the link between the Board and the Management. He/she provides relevant & useful information to the Board about the organization. He/she draws expertise of the Board for the benefit of the organization and supports the Board in its work. Thus, for running the organization on a day-to-day basis, the Board delegates the responsibility of the management of the organization to the CEO. In doing so, the Board takes the responsibility of setting the parameters or framework by setting policy, providing strategic direction, or exercising oversight. However, it remains the principal decision making body. The balance of power and responsibility between the CEO and the Board is the most crucial aspect of the governance structure of an organization. The strategic direction of the organization is set by the Board, while it is the responsibility of the CEO, who is the executive head of the organization, to further develop and/or implement the strategy in terms of the activities of the organization. The CEO also happens to be the focal point around which the entire organisation revolves and represents the organization to the outside world. The Board should regularly monitor the CEO’s work, while simultaneously guiding and mentoring through oversight. As the role of CEO is critical, there should be effective accountability mechanisms for the CEO.

  4. CEO can not be an active part of the Board. S/he should not take any position in the Board. S/he must function as an adviser to the Board and a mentor to staff members in the organization. Usually the Board members are not very experts in planning and implementation of policies and programs. A good organizational plan based on long term strategy (objectives of the organization) and day to day governance must be drafted and to get approved by the Board. A CEO should be supported by an expert team of various level of management then only he can get things done by right way and as expected.

    The Board should ensure proper reporting from the CEO based on the objectives and the set targets. A proper program compliance report based on the budgets and activities should be presented on quarterly meetings. Multi project status, Fund position, liabilities, control on admin expenses, proper HR management system etc. should be ensured in every meeting with the Board.

  5. Dear Friends,

    The board is the most powerful body in the organization and it is important to have a effective and independent board to ensure governance. It is the responsibility of the Board to take long term and strategic decisions with respect to the organization. The implementation part of the these decisions is then delegated to the CEO. Eg. Strategic plan, Finance and HR manual, approval of budgets and investments, opening bank accounts, internal control system amongst others.

    The board will have to evaluate the CEO on the basis of the effective implementation of the delegated responsibilities. This can happen during the course of the Board meetings or during the appraisal process. To be able to effectively monitor and appraise the CEO it is all the more important that effective/competent Board should be in place to be able to delegate proper responsibilities.

  6. Mr.Ravi Kumar

    It is not Form 10.It has to be mentioned in Part-II( Declaration under Sec.13 of Income Tax Act) of Audit Report in Form 10B. First see whether memorandum or trust deed permit or not.Salary to be Justified.

  7. A basic tenet of good governance is that the Management and Governance be kept separate. A line of distinction between the Governance and the Management should be demarcated in terms of their roles and responsibilities. The responsibility of the Board is to steer the organization in the right direction in order to attain its vision & mission. It is a known fact that Board members do not meet the staff on every day basis – This is so important, and organisations have failed because they didn’t maintain this line of distinction.

  8. Yes, paid employee can be on the board and his/her details like Salary paid and other details are to be shown in Form 10 every year while filing the Income Tax returns. Some organisation form their Governing body and executive body recruiting their Directors / Team leaders. My opinion is “Yes”, but it should be disclosed to I.T. every year.

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