A board of directors supervises the activities of a business entity (private or public company, non-profit organization cooperative, business trust, or family-held entity) and decides how the entity will be governed. Its members may be elected (bylaws or articles of incorporation) or appointed by shareholders. They are typically compensated for their service by salary or as part of an option plan to purchase stock. Shareholders or fiduciary duties violations could cause them to be removed from their positions, for example, selling board seats to outside interest groups and attempting to influence the vote to benefit their businesses.
Effective boards are able to balance the needs of stakeholders and the management’s vision. They include members from within and outside of the organization. The members are usually chosen for their expertise and knowledge in the field, and ensuring they have the right skills to effectively lead the business. They should be able to identify and assess risks, create strategies to reduce them and monitor the performance of the management.
When selecting new members for your board, ensure to take into account the time commitment they’ll have outside of their work. It’s also important to consider their availability and whether they have conflicts of interest. Detailed meeting minutes are essential to ensure that all board members are aware of their roles and responsibilities, guaranteeing accountability for any decision. In addition, it’s essential to develop a pool of potential candidates early in the process and let people know about board positions. This allows you to find qualified people before their term is over, avoiding slowing of strategy.