Board Structure, Roles and Responsibilities
Directors' duties
Directors owe duties of care and diligence, good faith, acting in the organisation's best interests, avoiding conflicts, and not misusing position or information. Candidates should be able to apply these to short scenarios: a director with a personal interest in a transaction must disclose and usually recuse.
Role differentiation
- Chair: leads the board, sets agenda, ensures information flows, encourages challenge.
- CEO/executive: implements strategy and runs operations within delegated authority.
- Non-executive directors: provide independent challenge and scrutiny; they are not there to manage.
- Company secretary: supports governance processes, board papers, minutes and compliance with procedure.
- Board vs management: the board sets strategy and appetite; management proposes and executes.
Delegation and authority
Boards delegate through committee terms of reference, delegation schedules and reserved matters. Delegation must be documented, with limits and escalation triggers. Questions often probe whether a delegated decision remains the board's responsibility - it does.
Traps
- Confusing accountability (board) with responsibility (management execution).
- Assuming non-executives can instruct staff directly; they usually act through the chair or CEO.
- Overlooking the duty to act collectively rather than as individuals.
- Treating conflicts as only financial; conflicts of loyalty and interest count too.
Worked example
A board delegates a major capital project to the risk committee. The project fails. Is the board absolved? No - delegation transfers work, not accountability. Rule of thumb: accountability stays with the delegating body; document the delegation and the reporting back.