The Board of Directors 515- Compare actual performance with budgeted performance for the current
period and for the year to date. Because the actual numbers are firm,
they provide a more objective basis for analysis than the current estimate
for the whole year. - Compare actual current performance with performance for the same pe-
riod last year. A carefully prepared budget incorporates changes in the
business and the economy that have occurred since the prior year, and
this is a more meaningful basis for comparison than last year ’s numbers.
If, however, the budgeted amounts, particularly the estimate of revenue,
are highly uncertain, the numbers for last year provide a firmer founda-
tion for compar ison.
Variances between actual and budgeted performance are discussed. Are
unfavorable variances temporary? If not, what steps will be taken to eliminate
them, or, if they result from unforeseen outside forces, what adjustments in the
company’s operations will be made?
By reviewing the company’s financial performance and raising questions
or making suggestions to management, directors form judgments regarding the
company’s affairs. Preparing and presenting to the board a report on the com-
pany’s performance is an important discipline for management.
Other Actions
Next, a number of proposed actions are submitted for board approval. Many
of these recommendations come to the full board from committees that have
discussed the topics in meetings held prior to the board meeting; these are
described later in this chapter. Questions may be raised about the recom-
mendations, but usually they are requests for clarification. Board members
rely on committee members to explore these matters thoroughly; there is not
enough time to do so in the full board meeting. Unless new information sur-
faces, these recommendations typically are approved.
The board also deals with a number of routine items. These include re-
quests for approval of capital projects, of signature authority for various
banking connections, of exceptions to pension plans, and of certain types of
contracts. Except for large capital projects, these items are usually referred to
as “boilerplate.” In most cases, they come to the board because state law, cor-
porate bylaws, or written policy requires board action. They are approved with
little discussion, sometimes en bloc, despite the fact that the minutes may state
for each of them, “After a full discussion, a motion to adopt the recommenda-
tion was duly made and seconded, and the motion was approved.”
Education
A division manager, assisted by senior associates, may report on the activities
of the division. This is an educational experience for the directors. (Some