The board of directors, including the executive board, proves critical for corporate governance, guiding strategic decisions, fostering accountability, and shaping an organization’s destiny. Comprising experienced individuals, the board acts as custodians of shareholders’ interests and safeguards long-term success. If you’re interested in joining a board of directors, read on to find out more about the roles and responsibilities.
What is a Board of Directors?
A board of directors is an appointed group of individuals with a fiduciary duty to represent the interests of shareholders or stakeholders and oversee a company’s management and operations. It acts as a governing board responsible for making major decisions and providing strategic guidance to ensure the organization’s sustainability and longevity.
The board of directors operates independently of the day-to-day management, offering oversight and accountability to safeguard shareholders’ interests. In addition, the board of directors includes inside and outside directors, each with different roles and perspectives. Inside directors provide valuable industry knowledge and operational insights, while outside directors, or independent directors, contribute nonpartisan judgment and objectivity to board deliberations.
All public companies are required to have a board of directors to represent shareholders. Many private companies and nonprofit organizations also rely on the guidance and supervision of a board of directors.
Serving as a critical pillar of organizational leadership and oversight, the board plays a pivotal role in:
- Risk management: A board committee sets up risk management frameworks, reviews risk mitigation strategies, and monitors the effectiveness of internal controls to protect the organization from potential threats.
- Shareholder protection: The board has a fiduciary duty to shareholders, safeguarding their interests and maximizing shareholder value. It ensures shareholders receive accurate and timely information, promoting transparency in financial reporting and disclosure.
- Stakeholder engagement: The board engages with various stakeholders, including employees, customers, suppliers, and communities. It considers their interests and concerns, fostering positive relationships and ensuring the company’s actions align with societal expectations.
By embracing their responsibilities and fulfilling their fiduciary duties, the board of directors contributes to building resilient, responsible, and successful organizations.
September 21 at 2:00 PM ET. August 17 at 2:00 PM ET. Leading this session will be Donna Hamlin, Ph.D. Dr. Hamlin is a corporate governance executive with thirty years of corporate governance and strategy consulting experience.
Board of Directors Roles
The composition of the board of directors varies depending on the organization’s size, legal requirements, and industry. Each member of the board committee has different roles that complement each other.
While most companies may have different members on the board of directors, most organizations have a president, vice president, secretary, and treasurer. Here is a brief description of each role:
- President: This is the leader of the board of directors, presiding over board meetings, setting the agenda, and ensuring discussions are productive and focused.
- Vice president: This person supports the president in their duties and may assume the president’s responsibilities in their absence, as they are the second in command.
- Secretary: The secretary is responsible for managing the administrative functions of the board. They maintain accurate records of board meetings, including minutes and resolutions.
- Treasurer: The treasurer works closely with executive management, financial professionals, and the compensation committee to oversee the organization’s financial health.
Depending on the organization’s structure and size, these roles may be combined or have additional responsibilities.
Board of Directors Responsibilities
The board of directors holds significant responsibilities in overseeing the management and governance of an organization. These responsibilities might include:
1. Hiring and setting compensation for executive leadership
The board is responsible for selecting and appointing the executive leadership, including the CEO. They participate in the hiring process, assess candidates, and ensure qualified individuals are chosen to lead the organization.
The board of directors ensures executive compensation aligns with the organization’s goals and attracts and retains top talent. They establish compensation structures, including salary and bonuses.
2. Adopting policies to address conflicts of interest
The board establishes policies and procedures to address conflicts of interest among board members, executive leadership, and other stakeholders. These policies help maintain the integrity and independence of decision-making processes, prioritizing the organization’s best interests.
3. Shaping the organization’s culture and vision
The board shapes and fosters the organization’s culture, values, and vision. They establish and promote a culture of ethical conduct, transparency, and accountability throughout the organization. They ensure the organization’s values and strategic direction align with the interests of shareholders and stakeholders, guiding the organization toward its long-term goals.
4. Improving the organization’s strategic focus and effectiveness
Board members, including the audit committee, assess the organization’s performance, review strategic plans, and make necessary adjustments to enhance the organization’s strategic focus and effectiveness. They monitor key performance indicators and ensure the organization is on track to achieve its objectives.
Traits of an Effective Board of Directors
An effective board member possesses certain characteristics that contribute to their ability to successfully govern and guide an organization. Those traits include:
- Competence and expertise: Board members bring diverse skills, knowledge, and expertise relevant to the organization’s industry, which allows them to provide valuable insights and make informed decisions.
- Collaboration and communication: Effective boards actively participate in discussions, listen to diverse viewpoints, and engage in constructive dialogue to reach well-informed decisions.
- Accountability: Board members act with integrity, adhere to ethical standards, and ensure transparency in their governance practices.
- Independence: An effective board includes independent directors who have no personal or financial ties that could compromise their ability to act in the organization’s best interests.
By embodying these traits, an effective board of directors can provide strong leadership, strategic guidance, and effective oversight.
How to Get on a Board of Directors
Getting on a board of directors requires a combination of qualifications, networking, and strategic effort. Some steps to increase your chances include:
- Building relevant experience and expertise in your field
- Seeking leadership roles
- Networking with professionals in the industry
- Joining professional associations and organizations
- Expressing interest in board positions
- Actively seeking opportunities to serve on committees or advisory boards
Also, develop a strong personal brand and showcase your skills and contributions. Building a reputation for integrity, leadership, and governance expertise will make you a more attractive candidate for board positions.
OnBoard Powers Effective Boards
In order to effectively carry out their duties, boards rely on board meeting software to streamline board operations. Board management software serves as a central hub for board-related communications and gives board directors a secure source of truth for everything they need to be effective in their roles.
With OnBoard, boards can simplify meeting management, collaborate securely, access meeting materials in real time, and ensure compliance with governance standards. The software is purpose-built to address real-world needs and reduce complexity so boards and leadership teams can work smarter, move faster, and achieve more for the organizations they govern.
Download our free board meeting agenda template for an example of how OnBoard streamlines board business.
Frequently Asked Questions (FAQ)
What is the Role of a Board of Directors?
The board of directors provides oversight and strategic guidance to an organization. It's responsible for making major decisions, setting policies, and ensuring the organization's long-term success.
What are the Differences Between a Board of Directors vs. a CEO?
The board of directors is responsible for governance, oversight, and major decision-making, representing the interests of shareholders or stakeholders. The CEO is hired and evaluated by the board of directors. They execute board-approved strategies, manage resources, and lead the executive team.
Who Appoints a Board of Directors?
The appointment of a board of directors depends on the organization. In publicly traded companies, shareholders elect the board of directors. In privately held companies, it can be determined by the organization's bylaws, articles of incorporation, or through agreements between shareholders.
About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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