A board of directors supervises the activities of a business entity (private or public company, non profit organization cooperative, business trust, or family-held entity) and decides how the entity will be governed. Its members may be elected (bylaws or articles of incorporation) or appointed by shareholders. They are typically compensated for their service, either through a salary or as part of a stock option plan. Shareholders and fiduciary duties violations can cause them to lose their positions, for example, selling board seats to outside interests and attempting to manipulate votes to benefit their companies.
Effective boards balance the interests of the stakeholders with the management’s vision. They have members from both inside and outside an organization. The members are usually selected due to their industry knowledge and experience, ensuring that they have the right skills to effectively guide the company. They must be able and assess risks, formulate strategies to reduce them, and oversee the performance of management.
When choosing new members to join your board of directors, consider their commitment to time as well as any other responsibilities they might have outside of work. It’s also crucial to know their availability and if they have any conflicts of interests. The minutes of meetings must be precise to ensure that all board members are aware their duties and responsibilities, ensuring accountability for every decision. It’s also important to build an initial pool of candidates in the process, and to make sure that you are able to spread the word about the board positions. This will allow you to identify candidates who are qualified before their term is finished, avoiding the risk of a delay in strategy.
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