A board of directors oversees the business activities of an entity (private or public company, non profit organization cooperative business trust, family-held entity) and decides how the entity will be managed. The members of the board can be appointed by shareholders or elected (bylaws or articles of incorporation, or bylaws). They are compensated through stock options or salary. They are able to be removed from their positions by shareholders or in cases of fiduciary duty violations, including selling board seats to outside parties and attempting to manipulate votes to benefit their own companies.
Effective boards balance the concerns board of directors of stakeholders with management’s vision. They include members from inside and outside an organization. The members are usually selected because of their expertise in the field and experience, ensuring that they possess the necessary skills to effectively steer the company. They must be capable of identifying and assessing risks, developing strategies to mitigate them and assessing the performance of management.
When choosing new members for your board of directors, take into consideration their time commitment and any other responsibilities they may have outside of work. It is also important to know when they are available and if they are in a conflicts of interest. Minutes of meetings that are detailed are crucial to ensure that all board members are aware their roles and responsibilities, while ensuring accountability for every decision. It is also important to develop a pool of potential candidates early on and let people know about the board’s opportunities. This lets you find qualified candidates before their term ends, avoiding a delay in your strategy.