A board of directors is a group of shareholders who elect members to represent the interests of a company. The board is comprised of the chief executive officer (CEO), senior managers and prominent individuals who are not involved in day-today operations. It establishes high-level strategies and supervises management, meeting regularly to review performance and track progress. It also approves and ratifies important corporate transactions, such as mergers and acquisitions, stock splits, new product launches, and so on. The board also determines policies on compensation for the CEO and other executives, assuring they are in line with the company’s goals. It also manages risk and supervises the performance of operations and financials including the preparation of annual budgets and reports.
A good board requires diverse perspectives and a range of knowledge. The best boards are highly proactive and engaged, addressing issues which could impact their business, including the importance of culture and strategic focus, leadership succession and talent management governance and risk, digital transformation and sustainability, and the possibility of mergers and acquisitions. They provide advice and oversight on these issues, while also ensuring the essential distinction between their duty as a board member and that of management.
In order to perform their duties and responsibilities, the most efficient board members work more closely with CEOs in order to understand the company’s strategy and vision, as well as the obstacles, as well as risks and obstacles. They are able to engage in a thoughtful debate that is focused on strategic planning, oversight and accountability. They also make decisions that board of directors are based on the company’s best interests while ensuring independence and avoiding conflicts interest.