The Relationship Between Directors And Managers

A member of the board of directors (a director) of a corporation must exercise her duty of care and her duty of loyalty to the corporation. And in order to do that, a director must be able to rely on a well functioning relationship with the management of the corporation.

Access To Information

Board members are entitled to have open channels of communication to management and unrestricted access to all information material to their duties as directors. If directors do not have open channels of communication to management or unrestricted access to the information they require, they may in danger of incurring personal liability.

As a result, board members need to have a close professional relationship with management in order to do their job appropriately. Directors should coordinate their requests for information, so that different directors are not asking different members of the management team for the same information. But fundamentally directors are obligated to obtain and management is obligated to provide all information that directors require.

In addition, it is best practice for management to send out the information that boards will be considering in their next board meeting far enough in advance of the meeting (two or three days is a good standard) so that directors can absorb the material and the board meeting itself can be spent digging into questions on the material or areas that require further discussion.

This amount of information gathering and presentation can become challenging for management and directors should use their best judgment as to when managers are spending too much time responding to requests for information, and too little managing the business. The more efficient that management can make the provision of information, the better.

There are tools, like iBoardrooms, that make the provision of information to directors easier for management and allow the creation of an centralized secure document repository so that managers do not have to reinvent the wheel if the information asked for has already been provided. By automating much of the logistical work, directors have access to more and better information and management has more time to run the business.

It goes without saying that this piece is not legal advice, and for that you should consult an experienced attorney. For more information on the relationship between directors and managers along with many other matters of interest see The Director's Handbook.


 

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