Board of Directors: Roles and Responsibilities

What is a board of directors

A board of directors is a group of people elected or appointed to govern an organisation on behalf of its stakeholders. The board sets the organisation’s strategic direction, oversees its finances, and establishes policy. It does not run day-to-day operations — that is management’s job.

The board’s core duty is directing the organisation’s affairs in the interests of its shareholders (for companies) or members (for not-for-profit organisations). This means setting the mission, vision, and strategic goals, and putting a governance structure in place that supports accountability and transparency.

Composition

A board typically includes both executive directors (who hold management roles within the organisation) and non-executive directors (who do not have day-to-day management responsibilities). Non-executive directors are not necessarily independent — a director who represents a major shareholder or has a long relationship with the organisation is non-executive but may not be independent. This mix brings both internal knowledge and outside perspective to the table.

Common board roles include the Chairperson (who leads the board), the Secretary (who manages statutory registers, lodges documents with ASIC, and ensures compliance — and is a named officer under the Corporations Act), and in many not-for-profit organisations, a Treasurer (who oversees finances). Companies under the Corporations Act do not have a statutory Treasurer role; financial oversight is typically handled by a finance committee or the CFO.

Responsibilities

The board is responsible for making sure the organisation is well governed, properly resourced, and on track to meet its objectives.

Key responsibilities include:

• Strategic direction. Setting long-term goals and monitoring progress.
• Oversight and accountability. Ensuring the organisation meets legal requirements, manages risk, and operates in line with its stated purpose.
• Governance. Establishing policies and procedures for how the board and the organisation operate.
• Financial oversight. Approving budgets, financial plans, and audits.
• CEO and senior management. Appointing the chief executive, evaluating their performance, and planning for succession.

Legal and ethical duties

Directors have legal duties under the Corporations Act 2001 (Cth). These include:

• Care and diligence (s 180) — exercise the degree of care a reasonable person would in the same position.
• Good faith (s 181) — act in good faith and in the best interests of the organisation.
• Proper purpose (s 181) — use powers for a proper purpose, not for personal gain.
• No misuse of position (s 182) — do not use your position to gain an advantage for yourself or someone else, or to cause detriment to the organisation.
• No misuse of information (s 183) — do not use information obtained as a director for personal benefit.
• Conflicts of interest (s 191) — disclose any material personal interest in a matter that relates to the affairs of the organisation.

Directors are also expected to make informed decisions, maintain confidentiality, and consider the long-term impact of their decisions.

Governance models

The governance model a board adopts shapes how it operates and interacts with management.

Common models include the traditional model (where the board makes all strategic decisions directly), the Carver Model or Policy Governance (where the board governs through policies and stays out of operations), and the stewardship model (where the board works in partnership with management while still holding them accountable). In practice, most Australian boards use a blend of models adapted to their circumstances.

Additional Resources

How to Handle Conflicts of Interest at your Not-for-profit Organisation

Decoding the Ethical Framework

What Is It About the Role of the Chair?

Related Terms

Committee

Materiality

In-Camera