The board of directors oversees the business activities of an entity (private or public company, non-profit organization or cooperative, business trust, or family-held entity) and decides how the entity will be governed. The board members can be appointed by shareholders or elected (bylaws or articles of incorporation). They are typically compensated for their service with salary or as part of a stock option plan. They are able to be dismissed from their positions by shareholders or in cases of fiduciary duty violations, for example, selling board seats to outside parties and attempting to influence votes in favor of their own businesses.
Effective boards are able to balance management’s concerns with the interests of stakeholders. vision, and usually incorporate members from both inside and outside the company. These members are typically chosen for their expertise and knowledge in the field, and ensuring they have the necessary skill sets to effectively guide the business. They should be able of identifying and assessing risk, developing strategies to reduce them, and monitoring the performance of management.
When choosing new members for your board, be sure you take into consideration the time commitment and other responsibilities they’re responsible for beyond their job. It is also important to know their availability and if there is a conflicts of interests. Meeting minutes that are well-documented will help ensure that board members understand their responsibilities and roles. This will also guarantee accountability for all decisions. It is also crucial to build a pool of candidates early in the process, and also to spread the word about the board positions. This will help you find competent candidates before the term ends, avoiding a slowing of strategy.
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