A board of directors is an elected group of individuals who represent the interests of a business. The board comprises the CEO, senior managers and other prominent people who aren’t involved in the day-today business operations. It is responsible for managing and establishing high-level strategies. It meets regularly to review and evaluate the performance of the company. It also approves and ratifies significant corporate transactions such as mergers as well as acquisitions, stock splittings, new product launches, and so on. The board also determines compensation policies for the CEO, other executives and ensures they are in line with organizational goals. It also manages risks, and oversees the financial performance and operations, including the preparation of annual budgets and reports.
A successful board requires diverse perspectives and a variety of expertise. The most effective boards are active and proactive, taking on issues that could impact their companies, including strategic focus as well as leadership succession, talent management, governance and resilience, risk, digital transformation, sustainability and possible mergers and acquisitions. They provide input and oversight on these issues, while also ensuring the vital distinction between their role as a board and management.
To carry out their duties and responsibilities effectively, the most effective board members work more closely with the CEO, allowing them to better understand the company’s strategy and vision as well as the challenges and risks. They are prepared to participate in a thoughtful discussion that focuses on strategic planning and oversight, as well as accountability. They make decisions that are in the best interests of the company, while preserving their independence and avoiding conflicts of interest.
