Board Member Roles and Responsibilities

Duty of Care

Under the General Corporation Law in Delaware, where many public companies are incorporated, duty of care requires directors to make informed business decisions based on all available material information. According to John Zecca, Chief Legal and Regulatory Officer at Nasdaq, and Joan Conley, Senior Advisor on Corporate Governance and ESG Programs at Nasdaq, a director must be able to commit to their role fully and become engaged with the company. A director must also devote the time and the care to ask questions and feel empowered to weigh in on business decisions.

Duty of Loyalty

Duty of loyalty, on the other hand, requires directors to act in good faith to advance the best interests of the corporation and to refrain from conduct, such as self-dealing, that harms the corporation. Some of the essential elements for directors to learn about the duty of loyalty are identifying perceived conflicts and having a process in place at the board level to communicate those conflicts with the corporate secretary and the general counsel, receiving guidance and potentially recusing oneself if necessary.

“It’s an attempt by the law to create a structure that encourages what we all know are just good principles for life—things you would expect if you were doing it yourself,” according to Zecca and Conley. “If you are loyal, if you have care, then you will exercise care. You are more likely to contribute to overseeing a well-run organization.”

Duty of Obedience

Meanwhile, duty of obedience requires every board member to adhere to the company’s by-laws and mission while also complying with state and federal laws.

Business Judgment Rule

While duty of care and duty of loyalty establish essential obligations for directors when making business decisions, the business judgment rule helps to ensure that directors act in the best interest of the company and its stakeholders. At the center of Delaware General Corporation Law is the business judgment rule, which affords directors making business decisions a set of presumptions that, so long as a majority of the directors have no conflicting interest in the decision, their decision will not later be second-guessed by a court if it is undertaken with due care and in good faith.

Crucial Board Member Responsibilities

While board member duties may vary based upon the company’s industry or sector, boards are often unified in several common board member responsibilities, from establishing the company’s vision and overseeing financial management to recruiting and onboarding new members and resolving conflicts of interest. Directors serve as the primary oversight for a company’s management team, ensuring that they execute strategic initiatives that align with the corporate purpose while maintaining legal compliance and integrity. Board members also help manage the company’s reputation and determine how to best handle resources, which could include adopting new technologies.

Even though board members may serve on different committees, such as the audit committee or nominating and governance committee, ensuring that the company is operating efficiently and effectively and making progress toward its strategic goals is the top priority for all directors.