Farmers are active members in many types of organisations, acting as directors on charitable boards in their communities, schools and of course co-ops as well as other agricultural companies and groups.

Unfortunately, in recent years, failures in corporate governance has caused scandal for many charitable organisations.

It is therefore not surprising that an increased regulatory burden has been imposed on organisations. This has added to the costs and complexity of overseeing and managing a business and has brought new challenges from an operational, regulatory and compliance perspective. With this, the role of directors has also become more complex.

Directors and potential directors need to be clear as to what their duties are, and also on how a board should behave, so that it can be at its best.

Definition

According to Harvard Law School Forum on Corporate Governance, 2021: “Corporate governance describes the processes, practices and structures through which a company manages its business and works to meet its financial, operational and strategic objectives and achieve long-term sustainability.”

The duties of a director

The duties of directors are captured in a variety of regulatory sources: common law, statute law and self-regulatory codes of practice. In Ireland, the common law relating to directors has been incorporated into statute in the 2014 Companies Act. Under Irish law, all directors, executive or non-executive (paid or voluntary) have the same obligations and duties.

Best interests

The duties of a director are to the company (not to the shareholders), a director must act “in the best interests of the company”, which is a longer-term focus than the short term/shareholder focus.

When starting on the board

First off, ask to read the constitution, and the director’s charter or handbook. There are also codes of governance, if involved with a registered charity, for example, a director must ensure that the company complies with the governance code. (charitiesregulator.ie | wheel.ie)

Key functions reserved to the board of a company:

  • Compliance with constitution – objects, values and purposes.
  • Setting policies, plans and budgets.
  • Ensure solvency/financial strength.
  • Ensure risk management plans and processes.
  • Ensure that the company is compliant with legislation.
  • Agreeing/ratifying all policies and decisions.
  • Identifying significant risks to the company.
  • Setting out a strategic vision; formulating a mission.
  • Attending meetings and making key decisions.
  • Selecting and overseeing the CEO.
  • Evaluating and improving its own effectiveness.
  • Other responsibilities:

  • Overseeing or carrying out fundraising.
  • Advocating on behalf of the organisation to the stakeholders/the sector/the community.
  • Carrying stakeholder’s views back to the board.
  • What is the difference between a board and a committee?

    A board is the body of people given the power to supervise, manage or “govern” a company, charity, organisation or group.

    Charity, or not-for-profit boards, come in all different shapes and sizes. They may even be called different things – a board of management, for example, or a council, or a trust.

    Whatever their name or size, all boards have the same basic roles:

  • To provide purpose, leadership, direction and strategy.
  • To ensure the group’s finances are sound.
  • To make sure the group’s operations are legal.
  • The board needs to look at the big picture, carry out constant assessment of the organisation’s performance and guide it towards its goals.
  • Who can be a board member?

    Although almost any adult can be a director, not everyone should be. A potential director must be prepared to be part of a collective voice.

    In essence, a person who puts themselves forward must be ready for the commitment; be willing to upskill, manage themselves and the behaviour of board members, to act collectively and to be held accountable to the law/regulations.

    You do not usually have to have any specific qualifications to be a board member, although boards are beginning to look for specific, relevant skills or traits to ensure informed decision making, and diversity of thinking/representation. Some skills such as legal, financial, networking, change, people, or business management skills are more in demand than others.

    In addition, some boards set aside one or more seats for people with particular qualifications (a subject matter expert or a technical expert for example) or for those representing particular groups (sector/stakeholder/community representations, for example).

    Although a board or committee member does need to be “eligible” in the eyes of the law to hold that position. Under the Companies Act 2014, an eligible director of a company:

  • cannot be under the age of 18 (Section 131). (Equally where a secretary is an individual, the secretary must also be over 18).
  • cannot be a body corporate (section 130).
  • cannot be an undischarged bankrupt (section 132).
  • cannot be a director of more than 25 companies unless those other companies are exempted (section 142).
  • cannot be disqualified (section 160 1990 Companies Act/Chapter 4 Part 14 Companies Act 2014).
  • The best boards are those that are inclusive, comprising people from all backgrounds and walks of life, and representing a wide variety of views and skills. Good boards are also strongly representative of the people they serve.

    Articles in this series

    1 What are my responsibilities as a director of a board?

    2 What do I need to know before I join a board?

    3 What do you need to do to develop an effective board?

    4 Managing ‘difficult’ people or situations

    About Karen

    Karen Brosnan.

    Karen Brosnan MBA is a consultant specialising in strategic planning and implementation, leadership development, governance, best practice, diversity and inclusion, culture change, communications, staff and stakeholder management.

    Karen advises boards and executives of organisations in the ag food sector.

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