A board of directors is independent from the management of the company. It oversees and advises a firm. They also make decisions to help it thrive. It ensures that the company operates in accordance with the laws and in the best interests of investors, employees and other stakeholders. Board members must have broad knowledge and experience, and are expected to foster an environment of trust and transparency.
The size, composition, and structure of a board can differ according to the kind of company. This includes whether it is publicly traded (as an open company), privately held (private or limited), or owned by family members or employees (family-owned). The rules that govern a board’s governance are set out in the articles of incorporation, or other bylaws.
The primary responsibility of the board is to fulfill three fundamental obligations:
A well-rounded board comprises members with a range of experiences and backgrounds. They are generalists, able to have a helicopter view, and yet are experts in their respective areas of expertise. They are willing to tackle tough questions and challenge the management’s assumptions. The best boards also encourage diversity and encourage collaboration, communication, and trust.
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