The Board's Role in Identifying and Addressing Foundational Risks Hidden Within Private Companies
(Originally appeared in the September 27, 2017 'Across the Board' Publication Reaching 22,500+ Savvy Business Leaders In Over 65 Countries - sign up here)
Boards in the private sector run the gamut when it comes to varying structures, operational procedures, size and required time commitment (yes, this list is much larger with considerations of voting members, non-voting members, equity partners, etc.). However, the overarching, and somewhat ambiguous, responsibilities of Board members when it comes to the true definition remains the same.
Under state statutory and common law, officers and Board members are fiduciaries of the organization they serve and must act in accordance with 3 fiduciary responsibilities:
In support of these 3 fiduciary responsibilities of the Board, there are high-risk areas within private companies that aren't frequently addressed nor do they receive the required 'digging' to ensure all is in order. In his book 'Business Divorce,' author Rocco Luisi addresses the top ten red flags hidden within private companies that drastically increase their risk of failure. It should get you thinking that even with the best intentions, skillsets and experience of the Board, these festering rust spots can breach the hull and sink the ship.
Companies face a myriad of challenges today, and this grows on a yearly basis. Addressing and mitigating risks associated with some of the known red flag areas in private companies can assist in creating a baseline of checkpoint areas - so you are not caught off guard attempting to bail out a sinking ship.
What will you consider when evaluating the private company you advise and serve?
Reach out directly to Mark A. Pfister to discuss your Board's overall strategy.
About the Author: In addition to sitting on numerous Boards, Mark A. Pfister is a certified Board Director and advises public, private and nonprofit boards in efficient and effective operations. He is the inventor of the 'Board as a Service' (BaaS) engagement model and an expert project/program manager frequently consulting on strategic global initiatives in their initiation and operational phases....... << read full bio here >>
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