A board of directors is accountable for the management of a business regardless of whether it’s a private or public company or business trust, coop, or a family-owned business. The members of the board can be elected (bylaws or articles of incorporation) or appointed by shareholders. They are compensated via salary or stock options. They can be dismissed from their posts by shareholders or in instances of fiduciary duty violations, for example, selling board seats to outside parties and attempting to influence votes in favor of their own businesses.
Effective boards are able to balance the needs of the stakeholders with the management’s vision. They have members from inside and outside the organization. These members are typically chosen for their expertise and knowledge in the field, making sure they possess the appropriate capabilities to effectively run the business. They must be able to identify and assess risks, formulate strategies to reduce them and monitor the performance of the management.
When choosing new members to join your board of directors, consider their commitment to time and any other responsibilities they might have outside of work. It is also crucial to be aware of their availability and if there is a conflict of interest. Minutes of meetings that are detailed are crucial to ensure that all board members know their roles and responsibilities, guaranteeing accountability for any decision. It is also important to identify potential candidates early on and let people know about board positions. This allows you to find qualified people before their term is up, thus avoiding a lag in strategy.