What Does it Really Mean to Be on a Board of Directors?
Preparing for a corporate board of directors role is a significant milestone in your professional career.
Being a member of a for-profit or corporate board of directors means serving as a member of a governing body responsible for overseeing and guiding the strategic direction, policies, and decision-making of a company.
BOARD STRUCTURE
Board members are typically elected or appointed by shareholders or stakeholders and have a fiduciary duty to act in the best interests of the company and its shareholders. Here is a basic overview of the structure of a board of directors:
Chairperson: Also known as the chairman or chairwoman, is the leader of the board.
Directors: Also called board members, are individuals elected or appointed to serve on the board.
Executive Directors: In some cases, directors may also hold executive positions within the organization, such as the CEO, CFO, or other senior management roles.
Independent Directors: Independent directors are individuals who are not employed by the company and do not have any significant business relationships with the organization. They are considered to be impartial and bring an outside perspective to the board. Read more about Independent Directors here.
Board Secretary: The board secretary is responsible for maintaining accurate records of board meetings, taking minutes, and ensuring compliance with legal and regulatory requirements.
Committees: Boards often establish committees to focus on specific areas of governance or oversight. Common committees include an Audit Committee, Compensation Committee, Nominating and Governance Committee, and Strategic Planning Committee. These committees consist of selected board members and may include independent experts or advisors.
BOARD MEMBER DUTIES
Here are the 7 key duties for members serving on a board of directors:
- Governance and Oversight: Board members are responsible for ensuring effective corporate governance by monitoring the company's management, operations, and financial performance. They provide oversight to ensure the company operates within legal and ethical boundaries.
- Strategic Decision-Making: Board members play a crucial role in setting the company's strategic direction. They participate in high-level discussions, provide guidance on major business decisions, and contribute their expertise and experience to help the company achieve its goals.
- Risk Management: Boards are responsible for identifying and managing risks that may impact the company's operations, reputation, or financial performance. They work with management to establish risk management policies and processes and regularly assess and mitigate potential risks.
- CEO Selection and Evaluation: The board typically selects, appoints, and evaluates the Chief Executive Officer (CEO) of the company. They ensure that the CEO is capable of effectively leading the organization and achieving its objectives.
- Financial Oversight: Board members review and approve the company's financial statements, ensuring their accuracy and compliance with applicable accounting standards. They also oversee financial controls, audits, and risk management processes.
- Stakeholder Relations: Board members represent the interests of shareholders and other stakeholders, such as employees, customers, and the community. They communicate with stakeholders, address concerns, and make decisions that balance the interests of various stakeholders.
- Board Committees: Boards often establish committees, such as audit, compensation, and governance committees, to focus on specific areas and provide in-depth analysis and recommendations. Board members may serve on these committees and contribute to their respective mandates.
The specific roles, responsibilities, and expectations of board members can vary depending on factors such as the company's size, industry, and corporate governance framework. But it is important to note that being on a board of directors involves legal and ethical responsibilities. Board members must act with due care, loyalty, and good faith, avoiding conflicts of interest and acting in the best interests of the company.
Read our blogs, Am I Ready for a Corporate Board of Directors Role?, and 5 Ways to Strategically Position Yourself for the Boardroom, for further information on the qualifications and experience typically needed to join a for-profit company’s board of directors.
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