A board seat comes with fiduciary duties, legal exposure, and responsibilities that deserve more than an informal handoff.
I've been in more than a few A/E boardrooms, and most look alike. Five to seven folks sit around the table. Everybody owns and/or runs part of the business. Each quarter they review the financials, discuss a couple of sideways projects and somebody who isn't working out, approve the bonus pool, and finish it all in time for lunch. Someone writes the minutes about a week later.
The people in those rooms are usually good people doing board work on top of a full plate. I have a ton of respect for that. What happens at that table helps determine whether a firm survives its founder, the next market shift, or its own success.
Consider for a moment how most directors got their seat at the table. They built a practice, bought in, or were the obvious choice when somebody retired. It's a legitimate honor, usually handed over with a handshake and congratulations. Yet almost nobody tells a new director what the seat requires or what exposure comes with it (apparently, the handshake covered that).
You can't really talk about governance without talking about fiduciary duty. As the reader is probably aware, a fiduciary is trusted to act for others. Take a board seat and you've accepted serious obligations to the corporation and its stockholders. Employees counting on the firm being around in 10 years have something riding on your performance, too.
Fiduciary duty isn't a mood, folks. It's a legal standard with three simple expectations:
- Put the firm first.
- Do your homework.
- Act honestly and in good faith.
Pretty basic, but it’s precisely how a board builds its fiduciary shield. Courts give directors room to make business decisions when they've done the work thoughtfully, addressed conflicts, and acted in good faith for the company. They know there’s no crystal ball at the center of the table.
Nonetheless, that protection is conditional. And being right in the decisions the board faces isn't the condition.
You can be wrong and still do your job
One important part of that fiduciary shield has a name. It’s known as the “business judgment rule,” or BJR. States across the country recognize some version of it (Delaware gets attention because its courts have spent decades explaining it. Your firm's state of incorporation generally supplies the law). When a board issues a decision, whether it’s approving an acquisition or hiring a CEO, courts assume the directors did their homework, acted honestly, and put the company first. Unless evidence knocks all that down, a judge won't second-guess the board because the acquisition was a bad one or the CEO flopped.
My point is, a bad outcome doesn't prove a bad board. The central question, and the question the courts will ask, is whether the board did its job before making the call. If challenged, the record should be able to show clearly exactly how the board got there.
Somebody has to bring trouble into the room
That brings us to the other half of the story, commonly called the “Caremark line.” The BJR gives a board room to make an honest business mistake. Caremark, on the other hand, asks whether the board made a good-faith effort to keep watch. In short, your board needs a reasonable reporting and monitoring system, and then it needs to pay attention to it.
In my work, that means a Board Charter that defines the job, DR&E and Reserved Matters that say what belongs in the room, and a Risk Registry the board reviews and acts on (among others). Caremark doesn't require those documents, and paper isn't a magic shield. They're simply practical and useful tools for getting serious compliance and mission-critical risks to the board in time to act.
Now, a bad decision alone doesn't make a board liable. Caremark liability requires bad faith; meaning, there was no real effort to establish oversight, or there was a conscious failure to monitor the system or respond to serious warnings before disaster struck. To put it bluntly, the common board response of “We didn't know” is a weak answer when nobody bothered to make sure the board would know. So be forewarned, your fiduciary shield gets thin when your board can't show how it kept watch.
Three ways to strengthen your board’s fiduciary shield
Having established all that, here’s my three-fold recommendation:
1. Open the bylaws and D&O policy together.
Put both on the next meeting agenda and read the bylaws' indemnification section out loud. Then pull the articles or certificate of incorporation and any director indemnification agreements. Bring company counsel and your D&O broker into the room. Ask what's covered, when defense costs get advanced, and what limits/exclusions apply. Understanding your protection takes a conversation.
2. Get intentional about decision rights.
What belongs to the board? What can management decide? What can committees approve? What must be escalated, when, and with what information? If those answers live only in the chair's and CEO's heads, that’s not a system. Caremark doesn't require a decision-rights matrix, but it goes without saying that clear written decision rights are one practical way to build and show intentional oversight. They put consequential decisions in the right room and give management clear boundaries.
3. Put a Board Charter at the center.
Bylaws establish the legal foundation, but a Board Charter goes much deeper to explain how the board works. Craft a charter and make it the apex of the board's governance operating system (beneath applicable law, the articles, and the bylaws). Inside it, define the board's role, Reserved Matters, management relationship, committees, meeting cadence, composition, and oversight. Connect the DR&E framework, committee charters, Risk Registry, and reporting calendar to it.
It’s not a small lift, but it’s more than worth building – now. A pile of governance documents sitting on five different laptops isn't a governance operating system either. The charter ties all the pieces neatly together and keeps the board work from depending on whoever just knows how things work.
The shield is there for your board. Don't make it thin. Your directors deserve more than a handshake and a seat. Give them a clear job and a system that helps them do it.
Zweig Group’s Board Advisory Services help AEC firms strengthen governance, clarify decision-making, and prepare boards for growth, transition, and long-term success. From board readiness and governance consulting to succession mapping and independent director placement, our team helps firms build boards that are equipped to lead with greater clarity and confidence.
Learn how Zweig Group can help strengthen your board and governance structure.
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Jeremy Clarke is COO and Mg. Director, Board Advisory Services at Zweig Group. Contact him at jclarke@zweiggroup.com. |
