Q&A: What is the Board of Directors’ Role in Compliance?

  • By: Josh Palmer
  • April 15, 2024
Reading Time: 3 minutes

As senior leaders of the organization, the board of directors implements compliance procedures to meet current regulations and ensures employees work in an ethical manner. 

From providing compliance training courses to maintaining oversight over the company’s trajectory, board members must take a leading role in ensuring compliance across the organization.

Read on to learn more about compliance and what board governance training entails.

What is Compliance?

Compliance refers to the act of adhering to laws, regulations, standards or guidelines set forth by governing bodies, organizations, or industry. It involves following specific rules and protocols to ensure that individuals or entities operate within the boundaries of legal and ethical frameworks. It’s important to note that compliance can encompass a wide range of areas, including financial regulations, data protection laws, workplace safety standards, environmental regulations, and more. Non-compliance, unfortunately, can result in various penalties, fines, legal actions, or reputational damage for individuals or organizations.

Two common examples of compliance include the creation of a compliance committee to focus on oversight and the writing of a compliance committee charter to provide a framework for the organization’s internal rules. 

The board of directors is collectively responsible for designing the company’s compliance programs, but different members fulfill different roles within management. A company secretary is often in charge of guidance for regulatory compliance. The board chairs and other directors are then expected to consult with them over legal matters.  

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What is the Board of Directors' Role in Compliance?

1. Approving Compliance Policies and Procedures

A primary mandate for the board of directors is to approve or develop organizational compliance policies and procedures regarding the internal code of conduct, conflicts of interest, and reporting bylaws to avoid legal issues. 

Board directors must emphasize that compliance and ethics are important to the organization and ensure policies are integrated into daily business operations. 

2. Overseeing Compliance Programs

After approving and formalizing the compliance programs, the board of directors must provide oversight over their implementation. Noncompliance can damage the organization and lead to fines, disciplinary action, or damaged reputation. Regular compliance-related meetings can reinforce key priorities, while regular audits can raise awareness of issues that need immediate attention.

3. Risk Management

Corporate compliance training should be focused on educating board members about the company’s assessment process for risks and how to identify risks themselves. 

Also pay attention to the standards set by your peers in the industry. This can help contextualize the decisions and policies of the board. 

4. Providing Oversight and Accountability

The board of directors should use their oversight mandate to create a culture of accountability and transparency within the organization. 

Monitoring employee behavior helps to maintain a high level of work performance and identify potential issues. 

5. Reporting to Stakeholders

The final aspect of compliance oversight is to report accurate financial information and pay dividends to stakeholders. The board is ultimately responsible for managing the finances of the organization, including budgets, financial reports, and financial statements. 

A lack of alignment at the highest levels will eventually make itself known in the form of inefficient work, general compliance issues, and a subpar user/customer experience. Board members must commit to documenting and reporting internal finances in a legally and ethically appropriate manner.

How OnBoard Improves Compliance

Effective compliance fosters a culture of integrity and accountability within the organization. When employees understand the importance of compliance and see it embraced by the board of directors, they’re more likely to adhere to regulations and company policies.

OnBoard software helps boards simplify manual processes, enhance communication and collaboration, and protect critical business data.

Top OnBoard features include:

  • Customizable minutes builder 
  • Video conferencing tools and Zoom integration
  • Secure messaging platform
  • Voting and collaboration tools 

OnBoard is also certified by SOC 2, GDPR, the Data Privacy Framework Program, HIPAA, and ISO 27001.

Download our free Board Meeting Minutes Template to see how OnBoard can help your organization. 

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About The Author

Josh Palmer
Josh Palmer
Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.