A board of directors is a elected group of individuals who represent the interests of a company. The board comprises the chief executive officer (CEO) as well as top managers and eminent people who are not involved in the day-today operation. It supervises management and formulates high-level strategies. It meets regularly to evaluate and monitor the performance of the company. It also approves major corporate transactions such as mergers, purchases stock splits, new launches of products. The board also establishes the compensation policies for the CEO, other executives and ensures that they are in line with the organization’s goals. It also manages risks and oversees financial performance and operations, including the preparation of annual budgets as well as reports.
A great board requires a variety of perspectives and a broad range of knowledge. The best boards are highly engaged and proactive, addressing issues that could affect their businesses, such as strategic focus on culture, leadership succession, talent management, governance as well as resilience and risk digital transformation, sustainability and the possibility of mergers and acquisitions. They provide oversight and advice on these topics while maintaining 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 goals and strategies as well as the risks and challenges. They are prepared to engage in meaningful discussions that is focused on strategic planning, oversight and accountability. They also make decisions according to the company’s best interests while ensuring their independence and avoiding conflicts of interest.