I want to eventually retire but be involved in a business as a board member. What makes a good board member and how can I learn how to become one?
The board of directors is ultimately responsible for the organisation. Each director has a legal duty and responsibility to assure that the organisation is run well, in compliance with all federal, state and local requirements.
Before taking a seat on a board, it helps if the member becomes aware of these duties and responsibilities, as well as the potential personal liability that courts will expect of you. There are three duties that underpin best practice as a good board member.
- Duty of obedience requires the board to act in accordance with the organisation’s rules and policies, and in furtherance of its goals as stated in the mission statement, articles of incorporation and bylaws. In addition, the board must comply with state and federal laws. The duty of obedience forbids acts outside the scope of corporate powers.
- Duty of care is a standard that requires a board member to exercise the same care that an ordinary, prudent person would exercise in a like position or under similar circumstances. It means that board members should attend board meetings and be informed about the activities of the organisation in order to be able to make informed and independent decisions when voting.
- Duty of loyalty is a standard that requires a board member act in good faith, be faithful to the organisation and pursue its best interests. It means that members must be dedicated to the organisation’s mission and put its interests above self-interest.
The best way to prepare for a position on a board is to do the Australian Institute of Company Directors (AICD) course.
The Company Directors Course is a comprehensive and credible learning program for directors to learn what it takes to contribute to organisational governance and gain a thorough knowledge of the role and duties of being a board member.
If you’re unsure whether this is the right course for you at your level, see Am I ready for the Company Directors Course?