Examine the annual report of a publicly traded company, and you will likely be greeted by photographs of smiling, well-dressed executives seated around a beautiful table in a professionally decorated conference room. Often captured ‘in action’, they will have their notepads outs, with charts and graphs displayed on a screen, while paying close attention to the speaker. If you were to ask investors in the company what that board of directors does, however, the answers would be a mix of confusion and insight.
Knowing the role of a corporate executive board can help employees and investors understand how the company works and the direction of the company.
What is a corporate executive board? Sometimes referred to as the executive board, or the board of directors, a corporate executive board is a governing body that oversees a publicly traded company. Elected by shareholders, the executive board is typically made up of people who are in the upper management of the company, have highly regarded business acumen or have an interest in the success of the company. Business laws and guidelines vary by country, but may affect the number of people on the board, and the ratio of employees vs. outsiders.
The corporate executive board is responsible for overseeing the hiring, compensation and duties of the chief executive officer. They can evaluate the appropriateness of acquisitions or mergers, make recommendations about stock sales and purchase and approve annual financial statements.
Within the board are often committees that focus on specific aspects of the company. Members of the board may be assigned to specific committees based on skill sets or job responsibilities. The Chief Financial Officer, for example, may be an accountant by trade.
The structure of a company will determine not only the role of the board, but will also impact the effectiveness of the board. A company that has a large, powerful shareholder who is not on the board may find that the board is constantly acquiescing to the shareholder’s wishes, while a company with a powerful board of directors may override an owner’s wishes.
Establishing the roles and responsibilities of all facets of a company will assist in the continued success of a company, and can help guide the company towards even greater profitability.
