A board of directors is a group of shareholders who elect members to represent the interests of a business. The board includes the CEO, senior managers, and other eminent people who are not directly involved in the day-today business operations. It develops a high-level plan and supervises management, and meets regularly to review performance and track progress. It also approves major corporate transactions, including mergers, purchases, stock splits, and new launches of products. The board also determines guidelines for compensation for the CEO and other executives and makes sure that they are in line with the organization’s goals. It also manages risk and supervises the financial performance and operations and the preparation of annual budgets and board of directors financial reports.
A good board requires diverse perspectives and a range of knowledge. The best boards are highly engaged and proactive, addressing issues that could affect their businesses, such as strategic focus, culture, leadership succession and management of talent, governance resilience and risk sustainability, digital transformation, and possible mergers and acquisitions. They provide input and oversight on these issues, while maintaining the essential distinction between their duties as a board and that of management.
To perform their roles and responsibilities effectively, most efficient board members work closely with the CEO to understand the company’s mission and strategy, as well as the challenges and risks. They are ready to engage in meaningful discussions which focuses on strategic planning, oversight and accountability. They also make decisions in the best interests of the company’s interests while ensuring their independence and avoiding conflicts of interests.
