Board of Directors Rights

Written by gail cohen
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Board of Directors Rights
(HRBOR.org)

If you've ever agreed to sit on a board, you likely received a warm welcome, a strong handshake and an armful of materials. Bill of rights? Unlikely. You probably decided to keep your mouth shut and your eyes open until you learnt the lay of the land. What stops organisations from drafting bills of rights for their boards? Some claim they lack a model from which to draft rights and responsibilities. Others believe boards are so individual, there's no way to cover all bases, but some general principles apply to all companies.

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Unlimited Access to Records

Whether you're involved with a for-profit or non-profit group, part of your responsibilities require having the right information from which to make judgment calls. This includes your right to receive copies of publications, reports, lists, assignments, project details and research documents. Your right to peruse these documents usually extends to your attorney and/or accountant if information in specific records directly affects their ability to personally advise you on relevant, board-related matters.

Obtaining and archiving meeting minutes is an essential right for all board members because future situations may call into question why a decision was made--and, importantly, where you stood on the matter. Board minutes have come back to haunt directors, so make certain you keep copies because they are literally the only record of what took place at meetings. Auxiliary to your access to board minutes, you also have the right to ask that changes be made to meeting minutes before they are approved should you take issue with the way a matter is described in the body of those minutes.

Internal Communications

Ongoing, meaningful interaction between board members and employees running the organisation is essential if misunderstandings and conflicts are to be avoided. You have the right to request copies of communications such as internal policies and procedures as drafted by current and past boards in order to make informed determinations about whether or not actions are in keeping with the organisation's mission and vision statements. Particularly critical are communications between directors and financial managers because paper trails have often saved board members from being prosecuted for mismanagement of funds.

Dissent

Your right to dissent can come in handy when opinions about how to handle a financial, operational or public relations matter begin flying around the room. Viewpoints come in all sizes, colours and shapes. You may not win every discussion or argument, but your dissension will go on record in board minutes. Additionally, you have the right to disagree with voting methods if you feel a secret ballot, voice, roll call or show of hands is not the way to handle a matter as long as the board's charter or bylaws don't prohibit the method you suggest. You also have the right to request a deferral of a roll call to a later time should you believe the time isn't right to act on the matter. That stated, you don't have a right to refuse to do what's asked of every other board member.

Calling Out Other Directors

A board directorship is more than a fancy title on the letterhead; it's a powerful position from which one must exercise power with caution and wisdom. Should board members restrict or interfere with the running of your organisation or make demands on staff that fall outside the guidelines approved by the board, you have the right to call another board member on their behaviour -- ideally, while in executive session rather than during the main board meeting. Additionally, you don't have the right to interfere with corporate or non-profit employees who are carrying on their duties as stated on their job descriptions unless there is shared concern among the entire board about alleged improprieties.

Protection Against Liability

Few entities are immune from the potential for lawsuits, but a board that has no director liability insurance in place is probably not a board you should join. Particularly vulnerable to potential litigation are companies and non-profit serving children and recreational facilities known to have a better-than-average potential for physical risk. Officers' and directors' liability insurance is critical in our litigious society, and you have the right to ask for it as a condition of your board seat.

Business Judgment Rule

The business judgment rule serves as legal protection offered to all board directors in the U.S. This rule says that as long as a director acts in a reasonable, informed manner while serving the best interests of the organisation, you are protected from having to revisit or second-guess actions taken during your tenure on the board. Courts have upheld this rule repeatedly, so as long as good faith is implicit, you should be protected by this rule from dicey legal confrontations that call into question your past actions.

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