You probably are seeing news nowadays that writes board members getting out and substituted in a number of days. If you're an employee, this makes you feel a little weird because your company do not announce to the press whenever a coworker departs their role and has their position filled by another.
To the members of the board, though, this is a common thing to do, together with other processes that help them improve a company. Here is the board directors explained:
What is A Board of Directors?
A Board of Directors comprises people, with particular expertise relative to the company's industry, to oversee and run a company. According to BDC, it's referred to as a Board of Directors because it is a board, or group, of elected individuals chosen to direct and oversee the activities of a company.
The word 'director' gives more emphasis to the board in terms of direction, the making of major decisions, and moving the leadership of the organization toward the attainment of specific goals. Now, they're like a group of employees because they also operate collectively, and share their respective responsibilities to make sure that the company functions effectively and accordingly.
Board of Directors in Public Companies
Based on Investopedia, publicly traded companies are businesses that share their equities with the general public through the stock exchanges so anyone can purchase those equities. That consequently means a large number of people called shareholders own the said company.
Since these individuals cannot directly run the business as they wish, they can elect a Board of Directors to run the firm. Because of this, the board has become an even more important body that guarantees accountability and trust. A board is fundamental for public companies because it offers leadership, oversight, and decision-making at the top level.
With shareholders scattered and mostly uninvolved in day-to-day running, the board ensures that the company is run responsibly and is on track with long-term goals. It also ensures that the company adheres to laws, its finances are handled correctly, and operates ethically. In other words, the board is there to protect shareholder investments while helping the company grow and maintain its reputation.
What Board Members Do in Public Companies
Within public companies, board members help set the company's goals and strategies by collaborating with top managers to decide where the company should head and check on progress regularly. This means they oversee the company's finances, where they review budgets, approve spending, and ensure everything is in order.
The board can also evaluate and select the top executives of the company to ensure that the management team is performing efficiently and responsible for the outcome. The last responsibility is to be the representatives of shareholders; they authorize major decisions like joining forces with another company or starting a new project.
In simple words, and according to the Corporate Finance Institute, the board of directors acts as the guide and protector for any public company. They make the company walk on the straight path; run the affairs responsibly in the best interests of their shareholders; contribute to increasing the size and strength of the company and strengthen the faith of investors among the investing public.
Join the Conversation