So you’re a director…..here’s what NOT to do
Understanding Your Role as a Director
So, you have been asked to be a director of a company and you have gleefully accepted. It is an honour after all, and you are a professional with significant industry experience. Of course you can be an effective member of the board!
Your First Board Meeting Experience
After the first board meeting, you realise that the board agenda included a lot of issues for board decision and several of the executives who made presentations asked the board for advice. You were eager to showcase your knowledge and expertise and engaged in a very spirited discourse with the presenters, asking (and answering) some difficult questions and rattling off statistics in support of your points. The Board Chairman seemed really impressed by your contributions and gave you free reign to give your two cents on each of the agenda items. You didn't really get a chance to vote much, because the board didn't seem comfortable making decisions on several of the matters that were raised for decision. You demanded more granular details from the management team because you wanted to understand exactly what was happening operationally and as a director you need to give direction and together with the rest of the board, control operations to ensure the success of the business. That is the essence of good corporate governance.
Or is it?
Regulatory Guidance and Director Duties
Regulators in international finance centres have taken pains to stipulate corporate governance practices and principles which the boards of regulated entities must follow. However, in the Caribbean, there is very little guidance given to executive or non-executive directors of unregulated entities. For most jurisdictions like the BVI, Barbados, Nevis, Belize and Cayman Islands, the companies act (or equivalent) sets out some basic principles, which essentially codify common law standards and duties. There is a duty of care: to act honestly, in good faith and in the best interests of the company. The director must exercise their powers with the care, diligence, and skill that a reasonable director would exercise in the same circumstances. While many directors may know and understand their duties in theory, few actually understand how that looks in practice.
Defining the Scope of the Director’s Role
In reality, directors often struggle with knowing the exact parameters of their role – what does acting in the best interest of the company entail? Does it mean putting every management action under the microscope? Does it mean taking a sledgehammer to every project budget to ensure fiscal prudence? Perhaps we should start with what the board is not responsible for and a simple checklist that helps directors determine whether or not a matter falls within that scope.
The Board’s Limitations
The Board is not responsible for:
The day-to-day operations of the company. The directors of a company are responsible for directing and supervising the business and affairs of the company (Belize Companies Act s100, BVI Companies Act s109, Nevis Corporation Ordinance s68(1), Cayman Islands Companies Act, regulation 66). This does not mean being involved in operational matters – that is the remit of the executive team. A useful test is to ask yourself: is this a decision that affects the strategic direction, risk profile, or structural integrity of the company? If the answer is no, it almost certainly belongs to management. The moment a board begins weighing in on vendor selection, approving staff rosters, or second-guessing operational timelines, it has crossed the line from governance into management – and in doing so, it unwittingly undermines the very executives it appointed to run the business.
HR matters relating to company employees. The board is not responsible for hiring and firing, nor for disciplinary matters related to company employees. The board is only involved in hiring and firing the CEO, or appointing other directors where the company's M&A permits. Everything below that level is a management function. This is a boundary that well-meaning directors breach more often than they realise – particularly when a shareholder, a close contact, or a longstanding employee is involved. The discomfort of staying out of it does not change the principle. A board that inserts itself into staff matters creates confusion about authority, exposes the company to legal risk, and sets a precedent that is very difficult to walk back.
Implementing company strategy. The board approves strategy – it does not execute it. There is a meaningful and important distinction between the two. The board's role is to interrogate, challenge, and ultimately approve the strategic plan that management presents. Once approved, implementation belongs entirely to the executive team. Non-executive directors who find themselves attending project meetings, directing departmental heads, or holding themselves out as sponsors of specific initiatives have slipped into a management role. The consequences are not merely structural. When something goes wrong – and at some point, something always does – a director who was operationally involved cannot credibly claim the governance protections afforded to those who maintained proper separation.
Approving budgeted expenses. Once a budget has been approved by the board, individual expenditures that fall within that budget do not require board sign-off. This is one of the most commonly misunderstood aspects of the director's role, particularly among directors who come from financial or accounting backgrounds. The instinct to scrutinise every line item is understandable, but it is misplaced at board level. The board's financial oversight function is exercised when it approves the annual budget, reviews management accounts, and satisfies itself that adequate financial controls are in place. Revisiting individual transactions that management has already sanctioned within an approved framework is not diligence – it is duplication, and it signals a fundamental lack of trust in the executive team.
Acting as a board of experts advising management.This one is perhaps the hardest pill for accomplished professionals to swallow. You were appointed to the board because of your expertise. Your track record is impressive. Management clearly values your opinion – they keep asking for it. And yet, the moment you pivot from director to advisor, you are no longer governing; you are consulting. The board's role is to ask the right questions, not to answer them. When executives present proposals to the board, they are seeking approval or guidance on matters of strategic significance – not a subject matter tutorial. A board that routinely offers expert opinions on operational or technical matters creates at least two problems: it muddies accountability (if management followed the board's expert advice and it went wrong, who is responsible?), and it discourages management from developing their own institutional competence.
Defining the Board’s Actual Responsibilities
So what is the board actually responsible for?
Understanding what the board is not responsible for is important, but it should not leave directors feeling as though their role is passive or peripheral. The board's role is critical precisely because it is focused. Directors are responsible for approving strategy, overseeing risk, ensuring the integrity of financial reporting, holding the CEO accountable, and satisfying themselves that the company is being managed in accordance with applicable law and the company's own constitutional documents. That is not a light mandate. It simply requires a different kind of engagement than many new directors expect.
Effective Governance: Knowing When to Step Back
The instinct to dive deep, to demonstrate expertise, to be visibly useful – these are natural impulses, especially for high-achieving professionals. But the discipline of governance lies in knowing when to pull back, ask the right question, and trust that your role is not to run the company, but to ensure it is being run well. That distinction, modest as it may seem, is the foundation of effective corporate governance.
Director’s Self-Assessment Checklist
The checklist below may help directors do a quick self-assessment when any matter arises at board level:
Does this matter affect the strategic direction of the company?
Does this matter involve a material risk to the company's financial position, reputation, or legal standing?
Does this matter require board approval under the companies act, the company's M&A, or an applicable regulatory framework?
Is the CEO or another board-level appointee directly involved or implicated?
If the answer to all four questions is no, the matter almost certainly belongs with management – and the board's most appropriate response is to note it, and move on.
