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A board of directors and individual members of a board have different duties and levels of authority, depending on the bylaws of the organization. Bylaws, which are the rules for general governance of the organization, extend and limit board authority. The board has ultimate authority over running the organization, while individual directors might have duties assigned by the board as a whole.
Boards of Directors
For-profits and nonprofits have boards of directors who oversee and govern the direction of their organizations. Some boards have little involvement with the day-to-day operations of the organization, delegating those duties to a management executive or company. Boards set strategic goals for an organization, such as issuing or buying back stock, paying dividends, acquiring a business, increasing nonprofit memberships or holding an annual conference. The board instructs its employees or manager to meet those goals, unless it is a very small organization with volunteer board members who do the work.
Corporations have bylaws that set the goals of the organization, prescribe some operating procedures and limit others. For example, bylaws explain when and how the board will conduct meetings; set the makeup of the board, including titles and responsibilities; mandate how board members are appointed, elected or removed; state what activities the organization must and cannot pursue; and prescribe how the board can hire employees.
The board meets several times each year to review the operations of the organization and to conduct its official business. Meetings follow formal procedures set out in the bylaws so that actions taken by the board are legal and binding. If the meeting does not have quorum, which is a minimum number of board members present, the board has no authority to make rulings. While the board can micromanage its employees, such as setting each one’s pay, determining what their hours will be and what software they will use, most boards hire an experienced executive director or CEO, or contract an association management firm, and have their top employee make the day-to-day business decisions after he presents his plans and budget.
Based on the bylaws or individual board votes, specific board members have different roles and authorities. For example, the board might rule that only the president and treasurer have the authority to sign checks, and that two board members must sign checks over a certain amount. The bylaws often specify that the president or chairman of the board runs board meetings, designating which board member runs the meeting if the president is not present. Individual directors often have committee responsibilities, must present plans and budgets for their committees to the full board, then receive authorization to proceed from the board. This might include the newsletter chairperson publishing the newsletter each quarter, or the meetings chairman organizing and running the annual meeting. Committee members often oversee this work, delegating its execution to the organization’s staff. Individual directors might lose certain rights if they have a conflict of interest, such as not being able to vote on an issue that involves their company. Board members usually don’t have the right to participate in contests the organization holds. Individual board members have the right to make, second and discuss motions and vote on them or abstain from voting.
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