A board of directors is a set of shareholders who elect members to represent the interests of the business. The board includes the chief executive officer (CEO) and senior managers and prominent individuals who aren’t involved in the day-to-day activities. It develops a high-level plan and supervises management, and meets regularly to review performance and track the progress. It also approves major corporate transactions, such as mergers, purchases as well as stock splits and new launches of products. The board also decides on the compensation policies for CEOs and other executives, ensuring they are in line with the company’s goals. It also manages risks, and oversees operations and financial performance, including the preparation of annual budgets as well as reports.
A great board requires a variety of perspectives and a variety of expertise. The best boards are engaged and proactive in addressing issues that could affect their companies such as strategic focus, culture, leadership succession as well as governance, talent management, risk and resilience, sustainability, digital transformation and the possibility of mergers and acquisitions. They provide oversight and input on these issues while preserving the essential distinction between their responsibilities and those of management.
To carry out their roles and responsibilities effectively, most effective board members work more closely with the CEO to learn about the company’s strategy and vision and the risks and challenges. They are prepared to participate in a thoughtful discussion which focuses on strategic planning as well as oversight and accountability. They also make decisions according to the company’s best interests while ensuring autonomy and avoiding conflicts of conflict of interest.