A board of directors (also known as a “board” or “BoD”) is an organization of individuals elected by the shareholders of a company to represent their interests. Board members set policies for overall company oversight and management, in addition to protecting shareholder assets. The board serves as a link between the shareholders of the company and the company and is responsible for ensuring that the company operates in a legally-sound and responsible way.
This involves setting the tone of the entire organization the distinction between a company mission statement and a strategic vision is that from the top by establishing the fundamental rules of ethical conduct. It approves corporate plans that are intended to build lasting value over time, chooses an executive director and supervises the CEO and senior management in operating the business of the company, which includes the allocation of capital for growth as well as assessing and managing risks.
The board also reviews financial reports and assures that the business’s operations are in compliance with laws and regulations. Additionally, it communicates with people who are involved, such as employees customers, suppliers, the local community and other stakeholders, to be aware of their concerns and improve the lives of these communities.
A company’s board should have an equal number of inside and outside members, with a mix of gender, age and ethnicity. Companies with a higher diversity of board members usually do better financially. A diverse board is more likely than not to have a range of perspectives and opinions that could lead to better decisions.