Small Business corporate governance board meeting at LOVE LAW FIRM, PLLC

Being on the Board of Directors of a company can be a great honor. Serving on a Board also provides you with a number of benefits. These include things like expanding your network and working in a broad professional circle. 

You can also grow your personal brand, as serving on a Board demonstrates to other executives that you’re a leader and ready and willing to help fashion the future of an organization. Plus, additional exposure can have a positive impact on your visibility and help showcase your unique value when sourcing other Boards. 

Finally, serving on a Board can make you better in your current position. You have the opportunity to gain deep insight into another company. This can help educate you on different methods of operating and how to approach problems with different strategies.

What are the Major Responsibilities of the Board of Directors?

 A Director for a company is tasked with many important responsibilities. These include, but aren’t limited to, the following:

  • Finding the right leader for the company. The Board recruits, manages, evaluates, and compensates the CEO or general manager of the company. While the CEO is tasked with hiring the other employees and overseeing the day-to-day operation of the business, the Board is tasked with ensuring the CEO is acting legally, ethically and in the best interests of the company. A Director should not act as a mere “rubber stamp” for the internal leadership of the company.
  • Supply direction. As a Director, you serve a strategic function in helping provide the vision, mission, and goals of the business with the CEO and other Board members.
  • Create a policy-based governance system. The Board must develop a governance system for the business. The articles of governance, such as the Bylaws, provide a structure; however, the Board develops a series of its own policies for how it will function and the rules of the road. As a Director, you will have input into creating these policies.
  • Exercising the fiduciary duty to protect the organization’s assets and shareholders’ investment. As a Director, you have a legal responsibility to represent and protect the shareholders’ interests in the business. As a result, the Board must make certain that the assets of the company are used wisely and ethically.  
  • Govern the company and the relationship with the CEO. The Board must develop a governance system, which involves the way in which it interacts with the CEO in order to provide the required oversight.
  • Supply monitoring and control. The Board has a monitoring and control function, meaning that it’s in charge of the auditing process. The Board typically hires an independent auditor to ensure the annual financials are fairly presented to the shareholders..

What are the Duties of a Director?

There are three primary duties imposed on a Director. As such you have:

A Duty of Care

A Director must actively participate and make informed decisions. You must attend Board meetings, evaluate proposals and reports, and provide input into the CEO’s performance evaluation. There is no legal requirement for specialization, but common sense is always a prerequisite.

A Duty of Loyalty

A Director must make decisions concerning funds and activities that promote the company’s objectives and mission, not private interests. You must also bring any potential conflicts to the Board.

A Duty of Obedience

Directors are required to adhere to the organization’s governing documents and obey all applicable laws.

What are the Functions of a Director?

As a Director, you are expected to vote on each issue presented to the Board for action. You should take actions on behalf of the company when delegated with such authority by the Board or the CEO. 

In addition, a Director must be able to communicate with all other Directors concurrently at any Board meeting and have the means of participating in all matters before the Board.

What Can’t a Director Do?

Unless as a Director you’re delegated with such rights, you can’t order the CEO or any employees to take a particular action. A Director can’t enter into a contract on behalf of the company or expend corporate funds. Further, you can’t use the company’s assets, for your own personal benefit.

You can’t divulge any confidential or protected information acquired through your position. Also, you can’t usurp for your own benefit any corporate opportunities intended for the corporation or act unlawfully in carrying out any delegated responsibilities.

Again, a Director has significant fiduciary duties and responsibilities which must guide his or her actions in representing the best interests of the company.

What is the Importance of a Board of Directors in Family-Owned Businesses?

A family business can enjoy some advantages over other businesses, such as commitment to quality and taking the long term viewpoint. However, family-run businesses also face several management challenges that are created from the blending of the family and business. Some of these obstacles and challenges can be solved with a Board. Many family-owned businesses start with a Board made up of family members, friends, and business acquaintances. But experienced outsiders can make the Board of a family-owned business more effective. 

Outside Directors might include executives or former executives in related industries, individuals with complementary skills, and other specialists who can add to the expertise of the Board and drive the business forward. Directors with complementary skills can provide an objective, critical perspective to a family-owned business. Outside Directors will increase and diversify the perspective and lend objectivity to matters of concern. This avoids a Board that simply “rubber stamps” executives’ decisions or adds nothing but redundant skills of current management.

Moreover, in helping family members develop into effective business leaders, a Board with outside members can improve the chances of a successful leadership transition within the family.

To Learn More

More about How Family Businesses Are Different Than Others

More about How To Improve Your Workplace Culture

Contact Us

If you have questions about being on a Board of Directors, work with an experienced New York business attorney. Contact Francine E. Love, Founder and Managing Attorney at Love Law Firm, PLLC, at [email protected] or (516) 697-4828 in Uniondale, NY.


Francine E. Love is the Founder & Managing Attorney at LOVE LAW FIRM, PLLC which dedicates its practice to serving entrepreneurs, start-ups and small businesses. The opinions expressed are those of the author. This article is for general information purposes and is not intended to be and should not be taken as legal advice. To learn more about LOVE LAW FIRM please see our website,


Francine E. Love
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Founder and Managing Attorney at Love Law Firm, PLLC which dedicates its practice to New York business law