A board of directors (also known as a “board” or “BoD”) is a group of people elected by shareholders of a business to represent their interests. Board members set guidelines for the overall oversight of the company and management, as well as protecting shareholder assets. The board serves as a link between the shareholders of the company and the company, ensuring that it operates legally and in a responsible way.
This involves setting the tone for the entire organization at the top, by establishing the fundamental rules of ethical conduct. It approves corporate policies that are designed to create lasting value over time, chooses an executive director and oversees the CEO and senior management in operating the business of the company, which includes the allocation of capital for growth as well as assessing and managing risks.
The board also reviews financial reports and ensures that they are in compliance with regulations and laws. It also communicates with all stakeholders, including employees, customers and suppliers, as well as the local community, to understand their concerns.
It is essential for a board of directors to have both inside and outside members, who are the right mix of gender and ethnicity, as well as age. In fact, companies that have more diversity on their boards usually perform better financially than those without. A diverse board is more likely to not have a range of opinions and perspectives that could lead to better decisions.
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