What Is the Board of Directors?

The board of directors is an organisation’s governing body responsible for supervising strategy and providing governance, steering the company towards its goals. It acts on behalf of stakeholders and shareholders, making key decisions that align with the organisation’s long-term strategy.

Who serves on a board of directors?

Board members are elected by shareholders, comprising executive and non-executive directors. They include:

• Executive directors: Active members of the organisation’s top management, who provide an internal perspective on pressing issues.
• Non-executive directors: Independent directors who act as objective advisors, providing strategic oversight, guidance and governance.
• Chair: Offers guidance to the board, leads meetings and facilitates board discussions.
• President: Guides executives, oversees growth planning and translates strategic plans into achievable goals.
• Board committees: Specialised subsidiaries of the board, focusing on areas like audit, compensation and governance.
• Secretary: Creates and maintains meeting records and ensures compliance with legal requirements.
• Treasurer: Oversees financial reporting, asset management and budgeting.

The main responsibilities of the board

• Corporate governance: Ensuring that proper corporate governance practices are in place to maintain transparency, accountability and fairness in the organisation’s operations.
• Protecting stakeholder interests: Representing and safeguarding the interests of stakeholders, ensuring the organisation’s decisions benefit them and stay true to the company’s mission.
• Strategic oversight: Providing strategic guidance to the management and aligning the organisation’s initiatives and operations with its vision.
• Managing risk: Identifying and mitigating risks, ensuring long-term stability and resilience in competitive landscapes.
• Accountability: Being answerable to shareholders for the company’s performance and ensuring compliance with legal and ethical standards.
• Communicating with stakeholders: Maintaining open lines of communication with stakeholders to inform decision-making and provide updates on performance and governance.
• Financial oversight: Monitoring the financial health of the organisation, including approving budgets, reviewing financial statements and ensuring accurate reporting.
• Succession planning: Devising a succession pipeline to ensure a smooth leadership transition, particularly for key roles like the CEO.
• Executive evaluation: Regularly evaluating the CEO’s and senior leadership’s performance to ensure effective management and alignment with company goals.

Legal and fiduciary responsibilities

The primary legal and fiduciary duties of the board include:

• Duty of care: The board must act diligently and exercise caution when making decisions, ensuring they have the company’s best interests at the forefront.
• Duty of loyalty: Directors must prioritise the organisation’s interests above personal gain. This includes timely disclosing conflicts of interest, maintaining confidentiality where necessary and taking accountability.
• Duty of obedience: The board must ensure compliance with all applicable laws and regulations, adhere to strict reporting requirements and follow company byelaws.

Types of board

Corporate

Corporate boards are the governing bodies of publicly listed for-profit companies. They align the company’s operations with shareholder interests and strategic objectives.

Executive

Executive boards are committees within the main corporate board and answer to the board. The executive board focuses on strategic thinking and possesses the ability to make decisions, particularly in between meetings of the full board, if a decision is time-sensitive. 

Governing

Governing boards set organisational policies, focusing on broader stakeholder interests. They oversee governance, provide strategic direction and ensure compliance for various entities, such as non-profits, educational institutes and healthcare organisations.

Non-profit

A non-profit board is the governing body of a nonprofit, focused on fulfilling the organisation’s mission while ensuring financial sustainability.

Advisory

Advisory boards offer strategic guidance without formal decision-making power. They often comprise subject matter experts and industry leaders to advise company leadership.

Public sector

Public sector boards govern government agencies and public institutions. They act in the best interests of their community and ensure that public resources are managed efficiently.

Best practices for the board

• Regular evaluations: Periodically conduct assessments of board performance to improve effectiveness and identify skill gaps.
• Clear communication: Maintain transparency and open lines of communication within the board and with stakeholders to ensure good governance.
• Continuous education: Engage in ongoing training and learning to stay informed about industry trends and governance best practices.
• Diverse composition: Foster board diversity in terms of skills, background and experience to benefit from unique perspectives.
• Managing conflicts of interest: Implement policies to identify and promptly address potential conflicts of interest.
• Accountability and transparency: Ensure the board operates openly and holds itself accountable for its decisions and actions.