Board charters have become a popular tool for boards to first discuss and then document the policies and guidelines that guide governance for their particular organisation.

A board charter is defined as:
A written policy document that clearly defines the respective roles, responsibilities and authorities of the board of directors (both individually and collectively) and management in setting the direction, the management and the control of the organisation.

Board charters have become an accepted part of the governance landscape. Many major inquiries, reports and leading practice recommendations refer to the need for board charters in delivering effective governance.

A board charter serves a number of important functions:
• As the top level policy document:
– Serves as a reminder for the board of the legal framework within which it operates.
– Documents the policies that the board has decided upon to meet its legal and other responsibilities.
– Assists the corporation’s leadership in delivering good governance.
– Allows communication of the board’s policies and expectations to management.
– Provides guidance and comfort to shareholders that the board has implemented robust governance processes.
– Is a point of reference for disputes.
– Serves as an induction tool for new directors and senior managers.
• As a top level process:
– Ensures that boards focus on how they can continuously improve their governance processes for the benefit of the organisation.
– Provides a forum to discuss some ‘hard-to-mention’ governance issues.
– Serves as a team development technique for both board members and senior management, to clarify roles and expectations.

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