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What Is a Board of Directors

A board of directors is the group of individuals who are tasked to oversee an organization. There are numerous types of organizations that a director may oversee - from public companies to nonprofits to private corporations - but the key responsibilities for a director will always be making decisions for the company on large issues and providing communication and guidance to the organization. These decisions are often related to fiduciary matters and it is key that the board best represent the interest of their stakeholders (such as their shareholders). Depending on the type organization, a board of directors will also be tasked with hiring and managing executive team members, providing for strategy for larger capital projects, managing investment, risk and oversight including cyber security and overall making sure that the organization is functioning properly and has the resources to continue doing so.

Structure of A Board of Directors

There is not a set or required number of board members for most boards. For many board of directors, the overall structure of the board – including the number of board members for that specific board, how new members will be selected and elected to the board, frequency of meetings, committees, etc. – will be dictated by the board’s own bylaws. Some boards can have as few as 2 – 3 board members while other boards may have well over 25 members. This same sampling of sizes also appeals to the number of committees on a board of directors. While some boards can function effectively with no committees, others can have several dozen standing committees in a wide variety of functions as required by the board itself.

Board size, specifically, may differ across the globe. In several countries, such as Germany, the board is divided into a two board system with a management board and a supervisory board. The management board (or executive board) is normally nominated by internal employees and elevates employees to these positions with the CEO of the company serving as chairperson. The supervisory board is tasked with oversight for the executive board as well as issues similar to that of a North American board of directors.

Independent Directors v. Inside Directors

In addition to the differences between public, private and nonprofit boards themselves, there is also a stark difference between the types of directors on the board itself. Some directors are referred to a inside directors already have a stake in the livelihood of the company. They may be a member of the company’s C-suite or may be a large stakeholder with a vested interest in the decisions that a board makes. On small private boards, they may even be an owner of the company or a family member.

Independent – or outside directors – on the other hand have no direct ties to the company when they are elected to the board. They may be on multiple boards and have several interlocks within the closed culture of directors but they are objective to the company itself prior and bring a unique perspective as a result.

How to Understand the Role of the Board

What Is A Board of Directors and How Does It Differ By Industry?

Long-tenured board directors no longer have the luxury of treating their board seats as rights. Succession planning is as big of an issue as diversity and board refreshment. Boards should expect continued pressure from investors and regulatory bodies to do self-evaluations and implement changes to ensure that their board of directors definition reflects qualified and diverse directors.

How Board Members Can Deepen Knowledge Of Their Organization

Overall, boards that have a comprehensive understanding of their corporations’ overall strategy will work better together as boards. The ending result is that organizations will get better value from their board and management.

What Is An Executive Board Session?

Executive board sessions were designed as part of the board’s risk oversight process. For the most part, board activity should be open, accountable and transparent. Yet, there are certain situations that demand the need for more candid conversations. These conversations may be confidential, sensitive or those where individuals may not feel that they can open up in front of certain other individuals.