In this board work glossary, we cover the most common terms you must know to ensure your board operates both effectively and efficiently.
Use it as your quick reference guide – whether you are new to board work, or simply want to clarify any of the terms that are key to how a board operates.
Board work glossary: A-Z
A
Abstention
An abstention is a decision by a member of a board of directors to vote neither in favour or against a motion or proposal. Board directors are not compelled to vote on all decisions. They can abstain by either stating their reasons or simply not voting. The most common reason for abstention is a conflict of interest, in which case abstention is compulsory. Abstentions do not happen often and continual refusal will call into question the value of the individual director to the board.
Audit committee
An audit committee is a committee of a board of directors that provides oversight over an organisations financial reporting processes. The committee is made up of a select group of board members who have financial expertise. The audit committee’s responsibilities include appointing external auditors, reviewing audits and implementing internal financial risk management systems and reports.
Adjournment of a board meeting
Adjournment of a board meeting is the act of ending a board meeting. The board chair puts the adjournment forward as a motion for the board members to vote on. Any unfinished agenda items are then carried over to the next meeting. If the board meeting has been covered in full, the chair can adjourn the meeting without a vote.
B
Board chair / Board president
The board chair – sometimes referred to as the board president – runs board meetings, provides leadership to the rest of the board and is responsible for setting high governance standards. The chair may also be required to provide strategic counsel to the CEO and report to shareholders as necessary. Board chairs do not usually vote on motions unless there is a tie.
Board committee
Board committees are specialist committees made up of a small subsection of the board of directors who have a specific area of responsibility. Examples of board committees include audit, remuneration and diversity equity and inclusion (DE&I) committees. There are generally two types of board committees: standing committees that meet regularly, and special task force committees set up to address a specific issue or disruptive event (such as a security breach or financial crisis).
Board director
A board director is an individual who sits on a board of directors. Board directors fall into two categories: executive directors, who are company employees (commonly the CEO or CFO), and non-executive directors, who are company ‘outsiders’ that provide independent oversight over the management team. Non-executive directors are also frequently called on to provide a fresh perspective on strategic issues.
Board of directors
Boards of directors are governing committees that provide oversight of an organisation’s financial, legal and compliance obligations. If the organisation is listed, the board of directors is also responsible for representing shareholder interests. The most effective boards also help management teams to set corporate policies, manage risk and advise on the organisation’s strategic direction.
Board governance
Board governance refers to the processes, standards, rules and ethical frameworks that define how a board of directors operates and reaches decisions. These structures are partly defined by the organisation itself, and partly by the external compliance framework that the organisation operates within.
Board governance can also refer to the service that the board provides to the organisations – i.e. the board provides governance and oversight of corporate operations and strategies.
Board meeting
A board meeting is a gathering where board members discuss a pre-set board meeting agenda. Meetings are run by the board chair and attended by board members, the board secretary and executive managers (such as the CEO or CFO) who are required to report to the board as defined by the agenda. During a board meeting, board directors vote on proposed motions related to pre-existing or new business issues.
How often board meetings take place varies. There is no statutory requirement for private limited companies in the UK to hold board meetings. The same is true for countries like Denmark, Finland, Netherlands, Norway and Sweden. In practice, meetings are usually held at least annually, often quarterly, and also in connection with annual shareholder meetings.
Board meeting agenda
A board meeting agenda is a list of topics that the board works through during a meeting. The agenda usually for a board meeting is usually structured as follows:
- Heading - including name and address of the organisation and the date, time and location of the meeting. If the meeting is online the heading should also include links for joining.
- Call to order - the chair announces that it is time to deal with the items on the agenda (otherwise known as ‘orders’).
- Changes to / approval of the agenda - the chair asks directors present for any changes needed in the agenda before moving forward,
- Approval of minutes - the chair asks if members of the board have any corrections or amendments to the previous minutes.
- Executive reports - the executive management including the CEO and CFO (and sometimes specialist committees) provide reports and updates on strategic direction, new initiatives, the latest financials and emerging trends or threats.
- Old business - the board revisits ‘open’ items that have been discussed at previous meetings that have not yet been resolved and still require sign-off and approval.
- New business - the chair, directors or executive team introduce new items of business for consideration which will require discussion and assignment of responsibility for further development and decision-making
- Adjournment - the chair thanks the board, relays the time and date of the next meeting and announces that the meeting is formally adjourned.
Board packs / Board books
Board packs are the information that board secretaries prepare for board directors before board meetings. Board packs typically contain the board meeting agenda, minutes of previous meetings, C Level leadership reports, financial reports, HR updates, board committee reports and any other points for discussion that the executive leadership team has identified as important. Board packs are also sometimes known as board books.
Board portal software
Board portal software provides boards and management teams with a secure digital platform for document sharing, collaboration and easy creation of board packs, board meeting agendas and meeting minutes. Board portals also feature secure digital archives and access to board documents online and offline. Board portal software replaces the manual paper-based processes, large volume printing and insecure communication via email that was typical of pre-digital board work.
Board portal features typically include:
- Secure messaging within the portal
- Easy annotation of documents
- Electronic signatures
- Batch signing of multiple documents
- Tools for creating board packs, board meeting agendas and minutes
- Personalised dashboards for users
- Two-Factor authentication login for secure access
- Secure and searchable repository for archiving confidential documents
Board of trustees
A board of trustees presides over a private business, nonprofit organisation or charitable foundation that is not publicly listed. The term is most commonly used for boards that preside over nonprofits.
Boards of trustees for nonprofits play a similar role to boards of directors in commercial businesses. There are key differences though. For example, alongside playing a strong governance role, nonprofit boards must also make sure their organisation complies with country-specific charity laws and any other cross-border laws that apply to it.
C
Conflict of interest
A conflict of interest occurs when an individual director has an interest (for example. sitting on the board of a different organisation) that may have an impact on the decisions they make. Board directors are required to declare any potential conflicts of interest before their appointment to a board. They must also declare conflicts before specific meetings or votes where applicable. In this case, the director will not be permitted to vote.
Consent agenda
A consent agenda is a common practice that board secretaries and administrators use to group routine agenda items that require approval during meetings under one agenda item. The purpose of a consent agenda is to save time during board meetings. This enables board directors to focus on more important issues.
Corporate governance
Corporate governance is one of the key functions that the board carries out in service of its organisation. By providing good corporate governance, the board ensures the organisation operates with internal and external rules and compliance requirements. Corporate governance also balances the interests of all stakeholders – including shareholders, management and staff.
D
Diversity, Equity, and Inclusion (DE&I) committee
Diversity, Equity, and Inclusion (DE&I) refers to policies that organisations use to promote equal opportunities and a welcoming culture for people of all genders, races, religions, disabilities, ages and sexual orientations. Diversity, Equity, and Inclusion committees are specialist board committees made up of a small subsection of directors who have a specific responsibility to oversee DE&I policies and performance in line with agreed targets.
Duty of care
The term duty care covers many different aspects of running an organisation. In the context of board work, duty of care usually refers specifically to the fiduciary responsibility of a board to act in good faith and be reasonably prudent with financial and other assets. Failure to show duty of care, which in the most extreme cases may result in bankruptcy of heavy financial losses, may result in legal action from shareholders or customers.
E
Electronic signature
Electronic signature, or eSignature, is a feature of board portal software that enables board directors to sign the minutes of meetings and other corporate documents securely and in compliance with company and official guidelines. Electronic signatures are just as binding as physical signatures on paper, although local legal requirements do vary. In Europe, the legal force of electronic signature solutions is defined by compliance with varying levels within EU eIDAS standards. The benefits of using electronic signatures include a faster singing process that speeds up decision making.
Entity management
Entity management is the system that parent companies use to manage filings and reports relating to subsidiaries which are legal ‘entities’ in their own right. Companies usually buy or set up subsidiaries to create competitive advantage, establish new assets or secure tax advantages. Boards of directors need to review entity management regularly to ensure that all subsidiaries are performing in line with the governance requirements of the parent company. They must also ensure all entities are compliant with all relevant regulatory requirements.
Environmental, social and governance (ESG)
Environmental, social and governance (ESG) refers to frameworks that organisations use to measure and report on how their operations impact the environment, local communities and wider society. Good ESG practices are becoming increasingly important for organisations that need to comply with regulatory standards and attract investment from ethically aware investment groups.
M
Meeting minutes
Board meeting minutes are the official record of what was discussed and the decisions that were made during a board meeting. Meeting minutes should include:
- The meeting location, date and precise time the chair called it to order
- Who attended the meeting and which members were absent
- The outcome of each motion (including who proposed it, who seconded it and how each member voted)
- Action items and next steps required to reach resolution
- The date and time of the next meeting
- The exact time the chair declared the meeting adjourned
Board meeting minutes are a legal document that can subsequently be presented in court. Following the meeting, the minutes need to be signed by the board secretary, the board chair and each board member whether they were present at the meeting or not.
Q
Quorum
A quorum is the percentage of people that need to be present at a board meeting for official business to take place or for decisions to be binding. What constitutes a quorum varies between boards and is usually defined by the policy of the organisation, the country it operates from, or whether it is a private or listed company. In general a quorum is considered to be between and a third to 50% of the board.
S
Shareholder
A shareholder is an individual or organisation that holds at least one share in a company’s stock. Depending on the company’s financial performance, shareholders are paid dividends either yearly or biannually. Boards of directors are responsible for representing the interests of shareholders by ensuring the organisation behaves in a strategically sound and financially prudent manner.
V
Virtual boardroom
Virtual boardroom is another name for board portal software that enables boards to collaborate, share documents and sign off decisions in a secure ring fenced environment online. The term virtual boardroom also sometimes refers to online meeting applications (such as Microsoft Teams) that are used to facilitate virtual board meetings.
