Today, the way companies are governed is more important than the way they are managed – there is a clear distinction between governance and management.

The Board plays a crucial and central role in governance, where the board of directors is responsible for: policy setting, strategic landscape development, compliance and oversight and performance management of the chief executive.

A chief executive has overall management responsibility, with other managers reporting to him or her. Authority and responsibility is delegated downwards with matching accountability expected upwards in return.

The Board of Directors is not part of the management structure. Every director has equal responsibility and similar duties and powers under the law. The work of the board, the governing body of the entity is superimposed on the management team.

The Board

The Board of Directors’ task is to direct the company. This involves four basic elements – strategy formulation, policy making, supervision of executive management and accountability to members and others.

Directors have to consider the future of the company as well as its present position and recent results, also take a view looking inward at the company and its component parts as well as externally at the company in its competitive market context and the broader economic, political and social context in which it operates.

In formulating strategy the board works with top management, looking ahead in time and outside the firm, seeing it in its strategic environment. Strategies need to be translated into policies to guide top management action and provide plans for subsequent control.

The board also needs to monitor and supervise the activities of executive management, looking inwards at the current managerial situation and at recent performance.

Accountability involves looking outwards and reflecting corporate activities and performance to the shareholders and other stakeholders with legitimate claims to accountability.