A board of directors is independent of the company management and supervises and gives advice to a business. They also take decisions to ensure that the company can thrive. It ensures that the company operates lawfully and in the best interests of employees, investors, and other stakeholders. Board members should possess many different capabilities and experience, and work to create a culture that is transparent and trusting.
The structure, size, and members differ based on the nature of the business entity, whether it is publicly traded (a public company), not publicly traded (private or limited), owned by employees or family members (family or employee-owned) or tax-exempt (a non-profit or charity). Each board’s governance is governed by its own set of rules, which can be laid out in its articles of incorporation or in other bylaws.
The board’s primary responsibility is to fulfill three essential obligations.
A well-rounded board consists of members who have diverse backgrounds and experience. They are experts in their fields however, they are also generalists who can look at things from a helicopter’s perspective. They are willing to ask tough questions and challenge management’s beliefs. The best boards encourage diversity and encourage collaboration, communication, and trust.
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