A board of directors is a set of people elected by shareholders to represent the interests of the business. The board includes the chief executive officer (CEO) as well as high-ranking managers, and other eminent persons who are not involved in day-to-day operations. It establishes high-level strategies and supervises management, and meets regularly to review performance and monitor progress. It also approves major corporate transactions such as mergers as well as acquisitions, stock splittings and new product launches, etc. The board also determines policies on compensation for the CEO and other executives, assuring they are aligned with organizational goals. It also manages risk and supervises financial and operational performance including the preparation of annual budgets and reporting.
A successful board requires an array of perspectives and knowledge. The best boards are highly active and involved, addressing issues that could affect their business, including the strategic focus and culture leadership succession and management of talent governance and risk sustainability and digital transformation, and possible mergers and acquisitions. They provide the input and oversight needed to address these issues, while also ensuring the essential distinction between their role as a board and that of management.
In order to perform their duties and responsibilities the most efficient members of the board collaborate more closely with CEOs in order to understand the company’s strategy, vision, and issues, as well as challenges and risks. They are able to engage in meaningful discussions that focuses on strategic plan, oversight and accountability. They make decisions that are in the best interest of the company, while also maintaining their independence and avoiding conflict of interest.