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What Does a Board of Directors Do?

Posted by Jonathan Krems | Oct 26, 2023 | 0 Comments

In today's Freedom Friday blog and email newsletter, I want to talk about a topic that once again I don't get very often, but especially if you're forming a non-profit (or even if you're forming a for-profit corporation), you need to pay attention to.  I want to talk about what a board of directors does for a corporation, be it a for-profit or non-profit entity.  In a for-profit corporation, the shareholders own the company and receive the profits (and losses), but do not necessarily participate in the management.  Similarly, in a non-profit corporation, the management is typically handled by a board of directors.  It's important to understand, for either a for-profit or a non-profit corporation, what the duties are of a board of directors.  In today's Freedom Friday blog and email newsletter, I'm answering the question, “What does a board of directors do?”

In general, a board of directors' duties for a for-profit corporation will differ somewhat from a non-profit corporation, and that's just because of the nature of the business.  However, either way, there are specific duties that any board of directors will have to the organization, and these are known as “fiduciary duties”.  In today's Freedom Friday blog and email newsletter, I want to talk about four fiduciary duties of any corporate director:

  1. Duty of Competence and Knowledge

The first general fiduciary duty of a corporate director is the duty of competence and knowledge.  Directors of a corporation, for-profit or non-profit, need to be competent and knowledgeable enough to make reasonable decisions on behalf of the business.  They should at least have a rudimentary, or basic, understanding of the business or non-profit in order to fulfill their role as a director on the organization's board.

  1. Duty to be Informed

The second general fiduciary duty of a corporate director is the duty to be informed.  The directors not only need to have a working knowledge of the business or the organization itself, but they also need to keep themselves informed of the activities of the business or the organization.  Directors need to be aware of changes in the company and its activities.

  1. Duty to Stand Against Misconduct

The third general fiduciary duty of a corporate director is the duty to stand against misconduct.  Directors of a for-profit corporation or a non-profit cannot turn a blind eye to misconduct on any level.  Even if it is profitable or beneficial to the business or the organization to avoid confronting the misconduct, directors must confront and take a stand against the misconduct, especially if they observe it.  This means if a director finds out about someone in the business or organization doing something illegal that they need to object and work to get it corrected.

  1. Duty to Review Finances, Policies, and Procedures

The fourth general fiduciary duty of a corporate director is the duty to review finances, policies, and procedures.  This means that the directors have a responsibility to review the financial statements of the company, and that includes the books of a non-profit, too.  They also have a responsibility to oversee the policies and procedures of the business or the organization as part of their general supervision.

Thinking about starting a small business?  Or maybe your business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

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About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...


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