The Role of the Board vs. the Role of Management

As the corporation’s ultimate decision-making body, the board of directors has both an oversight role (overseeing management on behalf of shareholders and other constituencies) and an advisory role (advising management), with limited involvement in every-day company operations. NACD’s founding president, John Nash, coined the term “nose in, fingers out” (NIFO) to capture this important distinction between observation and advice, versus action. By contrast, members of management are full-time company employees whose main responsibility is to operate the company.

This memo explores the differences and overlaps between the roles of directors and managers in for-profit enterprises.

Q: How do board and management roles differ? Where is the dividing line between them?

A: This memo answers this question by addressing the following topics:

1. The Role of Directors
2. The Role of Management
3. The Interrelationship Between Directors and Senior Managers
4. Overcoming Challenges in the Board/Management Relationship
5. Key Questions For Boards to Ask
6. Recommended Action Steps
7. NACD Resources and Additional Resources
8. Additional Resources