The board of directors is the center of corporate powers in a company. Under the laws of most states, the board of directors holds the authority to manage corporate business and affairs.

Under the “business judgment rule,” the board is able to develop corporate strategies without fear of liability for poor business decisions. However, the board of directors will be liable for actions that are not:

  • In good faith
  • Performed with ordinary care
  • In the best interests of the corporation based on the reasonable beliefs of the directors

Success Factors for the Board of Directors

What makes a successful board of directors? In addition to business expertise and hard work, a board of directors is often the most successful when strictly upholding federal laws and fiduciary duties owed to shareholders.

Here are several tips for corporate directors:

  • Thoroughly understand your company and your industry
  • Read and review meeting agendas well in advance
  • Read and review board meeting minutes
  • Understanding internal and external risks
  • Develop and maintain oversight and compliance systems
  • Participate actively and ask questions at board meetings

Even though all of that sounds commonsense, directors often have trouble even with the simplest of the above points, such as asking questions at board meetings. Depending on the state law, some directors may serve on multiple boards, resulting in a lack of expertise in a company’s industry. Other directors may be dominated by a powerful CEO. These situations can result in rubber stamping, where directors never actually contribute to company operations.

Seeking Legal Help

You should contact an experienced commercial lawyer if you do not fully understand your role as a member of a board of directors. You should also seek legal help in the board is going through a crisis or if certain decisions don’t seem ethical. An attorney can also help with corporate governance issues as monitoring, oversight, compliance, and disclosures.