The Role of a Board of Directors
A board of directors is a group elected by shareholders that represents shareholders and owners and acts as a fiduciary in order to safeguard their investment. They establish the high-level strategy of the company and supervise management by regularly meeting with and assisting senior executives, such as the CEO. They also create governance systems by electing officers to specific roles, like chair or president of the board.
Most boards have a mix of inside and outside members who are acquainted with the internal workings of an organization, along with qualified people who are not employed by the business but carrying knowledge in a specific field. Some countries have laws governing the structure of the company’s board. These laws set requirements for how many people are elected to the board and for how long the terms of their tenure.
Boards are responsible for establishing corporate policies, such as supervision and management, deciding whether to issue dividends, stock options or other plans to repurchase shares and the hiring and firing of top management, as well as bringing in or firing new members. They also make major decisions, such as mergers and acquisitions, and also appoint committees that work on specific functions, such as audit or compensation.
Another important responsibility is to protect shareholders’ interests by promoting transparency and providing shareholders with timely and precise information, particularly when it comes to financial reporting and disclosure. As a result, it’s vital that a company has a strong board of directors to ensure longevity and its success. Investors should also be aware of the role and election process of the board of directors as their decisions could have a significant impact on a company’s profitability.