The Role of a Board of Directors in Corporate Management

A board of directors (also called a “board” or “BoD”) is an elected group of individuals by a company’s shareholders to represent their interests. Board members create guidelines for the supervision and management of a company, as well as protecting shareholder assets. The board acts as a liaison between the shareholders and the company and ensures that the company is operating in a responsible and legal manner.

This includes establishing the foundational rules for ethical conduct and setting the tone at the top for the entire company. It approves corporate strategy that is intended to build long-term value and sustainability, selects and oversees a CEO and high-level management to manage the company’s operations, which includes assigning capital and managing risk.

The board also reviews financial reports and assures that the company’s activities are in compliance with laws and regulations. Additionally it engages with all the various stakeholders, including employees, customers, suppliers as well as the local community and others, to understand their concerns. The goal is to create a positive impact on those communities.

The board of a company should comprise a mix of inside and outside members with a mixture of age, gender, and ethnicity. Companies that have a greater diversity of board members usually do better financially. A diverse board is more likely not to have a variety of viewpoints and opinions that can lead to better decisions.