A board of directors is an elected group of individuals who represent the interests of a business. The board is comprised of the CEO, senior managers and other notable people who are not involved with the day-today business operations. It oversees management and establishes high-level strategies. It meets regularly to review and evaluate performance. It also approves major corporate transactions, like mergers, acquisitions, stock splits and new launches of products. The board also establishes compensation policies for the CEO, other executives and ensures they are aligned with the company’s goals. It also manages risk and oversees operational and financial performance including the preparation of annual budgets and reports.
A successful board requires diverse perspectives and a wide range of knowledge. The best boards are active and proactive, taking on issues that could impact their companies, including strategic focus, culture, leadership succession the management of talent, governance and resilience, risk, sustainability, digital transformation, and possible mergers and acquisitions. They provide guidance and oversight on these issues, while also ensuring the critical distinction between their duty as a board member and management.
To carry out their duties and responsibilities effectively, most effective board members work more closely with the CEO, allowing them to better understand the company’s goals and strategies, as well as the risks and challenges. They are prepared to participate in a meaningful discussion which focuses on strategic planning monitoring and accountability. They also make decisions based on the company’s best goals while maintaining their independence and avoiding conflicts of conflict of interest.
