Jim Kiley and Bob Schillerr, two of our industry's most experienced leaders, have collaborated on this article examining the requirements for an effective working relationship between the board of directors and the general manager. They have provided us with guide for creating a positive working environment, defining board and manager responsibilities, and a list of commandments for an effective relationship.
The relationship between the general manager and board of directors must be one of trust and respect. The board of directors, individual board members and manager may not always agree or have the same viewpoints, but always in the end the board of directors and manager must work together as a team in the best interest of the membership and the cooperative. Differences of opinion in the board room are healthy, but when the discussion is concluded and the board votes, each board member and the manager has the responsibility to carry out the decisions of the board of directors.
The Model Business Corporation Act describes the responsibilities of a director as follows:
"A director shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented."
The Model Business Corporation Act continues with responsibilities and authority of individual directors and the board of directors in many cases; however, we will discuss only one specific area: how the board of directors and manager must work together as a team.
The board of directors receives its authority and power from the Articles of Incorporation and Bylaws as adopted by the membership. Through these legal documents the membership delegates to the board of directors the responsibility to manage the day-to-day activities of the business. Directors are elected by the membership and function as individuals, but once board decisions are made they have only one voice--one which reflects the majority of the full board of directors' decision. The board of directors delegates authority and responsibility to the manager to manage the day-to-day operations of the cooperative.
Conflict or disagreement between the board of directors and manager or between an individual director and the manager must be resolved in open and honest discussion in the board room; otherwise it will lead to split boards, termination or resignation of excellent directors or managers. Unresolved conflict between the board and manager may create unrest and organization problems, and many times it takes years to rebuild trust and confidence. Most disagreements in the board room are not about the construction work plan or spending money on plant expansion, and they're usually not about financial forecasts indicating the need for future rate increases, power requirement studies, strategic plans or annual work plans and budgets.
Most disagreements between the board of directors, individual directors and managers take place over employee compensation, performance of individual employees or their outside activities, individual directors meeting with members or employees to discuss cooperative business or to find out how well the manager is performing. When the board of directors, individual directors and the manager understand and perform their responsibilities properly, these types of misunderstandings will be minimized.
How do successful boards of directors and managers create a positive working environment?
First, the board of directors and manager must understand and respect each other's authority and responsibilities. …