Board of directors
The Board of Directors (the board) is a group of appointed or elected officials within a company that oversee the activities of the company (or organization). Depending on the type of organization, the responsibilities and make-up of the board will vary in size and scope.
The responsibilities and powers of a Board of Directors are granted by the organization, and are detailed in the bylaws of the organization. Also included in the bylaws is the number of board members, the length of their terms, how the members are selected and how often the board meets.
Typical responsibilities of a board may include:
- Selection and oversight of the chief executive
- Approval of annual budget
- Establishing policies and procedures
- Reporting to shareholders about the company’s performance
In a corporation that has shareholders, the board is elected by the shareholders and is the governing body of the corporation. The Board of Directors is representative of the shareholders, and acts on their behalf in the management of the corporation. In corporations that do not have shareholders, the board selects its own members and is the highest authority of the corporation.
A well balanced Board of Directors will have an equal number of members who represent the interest of the shareholders, as well as members who represent the interest of the management. Members of the board may include people from different industries, shareholders in the company, management officers from within the company and members of the community that the company operates in. By having a board of various individuals, the corporation can benefit from having a full range of perspective and experience.
In addition, having members on the board who are both shareholders and management will ensure that both points of view are reflected in the decisions and policies set by the board – eliminating the possibility of a board that favors profits at the expense of personnel, or a board that promotes employee issues over company profits.
When a board of directors is effective, it can help to steer a company to success. Maximizing the impact of the board can assist the company in reaching its corporate goals and help maintain the financial success of the corporation.