A board of directors is an elected group of people who represent the interests of a business. The board is comprised of the CEO, senior managers, and other notable people who aren’t directly involved in the day-to-day business activities. It formulates a high-level strategy and oversees management, meeting regularly to review performance and monitor the progress. It also approves major corporate transactions, such as mergers, purchases as well as stock splits and new product launches. The board also determines guidelines for compensation for the CEO and other executives, assuring they are in line with company goals. It also manages risk and oversees the operational and financial performance and budgets, as well as preparing annual budgets and reporting.
A good board requires diverse perspectives and a broad range of expertise. The best boards are engaged and proactive in addressing issues that could affect their companies such as strategic focus on culture, leadership succession and management of talent, governance resilience and risk sustainability, digital transformation, and possible mergers and acquisitions. They provide oversight and guidance on these issues, while also ensuring the vital distinction between their role and that of management.
In order to perform their duties and responsibilities, the most effective members of the board collaborate with CEOs in order to understand the company’s strategy and vision, as well as its obstacles, as well as risks and challenges. They are prepared to engage in a productive discussion that is focused on strategic planning, oversight and accountability. They also make decisions based on the company’s best interests while ensuring their independence and avoiding conflicts of interests.