A board of directors oversees and advises an organization, is not a part of management and makes decisions to help the firm thrive. It ensures the entity is legally operating and in the best interest of employees, investors and other stakeholders. The Board members must have a wide range of skills and experience and strive to establish a culture that is open and trustworthy.
A board’s structure, size and membership depend on the type of business entity it is, whether it is publicly traded (a public company), not publicly traded (private or limited), owned by family members or employees (family or employee-owned), or tax-exempt (a charity or a nonprofit). The rules governing each board’s management are specified in the articles of incorporation or other bylaws.
The primary responsibility of the board is three core obligations.
A well-rounded board includes members with a variety of experiences and backgrounds. They are experts in their fields but are also generalists who can see things from a helicopter’s point of view. They are able to tackle tough questions and challenge management’s assumptions. The most effective boards also encourage diversity, and encourage collaboration as well as communication and trust.