A board of directors supervises the activities of a business entity (private or public company, non profit organization, cooperative business trust, family-owned entity) and decides how the entity will be managed. The members of the board can be elected (bylaws or articles of incorporation) or appointed by shareholders. They usually receive compensation for their service, either through a salary or as part of an option plan for stock. They can be dismissed from their posts by shareholders or in instances of fiduciary duty violations, such as selling board seats to outside interests and attempting to manipulate votes to benefit their own businesses.
Effective boards take into account the concerns of stakeholders and the management’s vision. They include members from both within and outside of the organization. They are usually chosen because of their expertise in the field and experience, assuring that they have the right skills to effectively guide the company. They should be able to identify and assess risks, devise strategies to reduce them and monitor the performance of the management.
When deciding on new members to join your board, make sure to consider the time commitment and other responsibilities they’re entrusted with beyond their duties. It is also crucial to determine their availability and if there is a conflicts of interests. Minutes of meetings that are precise will ensure that board members are aware of their roles and responsibilities. This will also guarantee accountability for all decisions. It is also important to identify potential candidates early on and make sure to inform people about board positions. This will help you find qualified candidates before their term is finished, avoiding the risk due diligence process of a delay in strategy.