Board Directors Corporate Without In Cook
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A board of directors (BofD) is the governing body of a corporation or other organization, whose members are elected by shareholders (in the case of public companies) to set strategy, oversee management, and protect the interests of shareholders and stakeholders.
The board of directors is composed of individual men and women elected by the company's shareholders for multiple-year terms–usually on a rotating system so there is not a complete board changeover.
If your business is a corporation, then you are required by law to have a board of directors. Depending on your particular corporate structure and your state, one or two directors may be all that's legally required.
They report to the Board of Directors, which is a group of individuals that provides oversight for the company. So, while the CEO is not technically a member of the Board of Directors, they do report to the Board and are responsible for the day-to-day operations of the company.
For publicly traded companies, boards typically comprise executive, nonexecutive, and independent directors elected by shareholders. This is known as a one-tier board structure. The board of directors often includes the CEO and sometimes the CFO of the company.
What Is Board Composition? Board composition refers to the people in an organization's board of directors and what they bring to the board table, such as their management background and skills. Board composition varies widely depending upon an organization's goals and industry.
Those Who Lack Objectivity If you can't take a step back and look at the big picture, you're not going to be an effective board member. You need to be able to objectively assess a company's performance and make decisions that are in the best interests of the company, not just yourself or your friends on the board.
Private companies are not legally required to have a board of directors, but many choose to do so in order to create a structure of accountability and good governance. Having a board can also be helpful in attracting investors and other key stakeholders.
Additionally, every public corporation is legally required to elect a board of directors. Private companies are not under the same obligation; however, they also tend to elect a board.
The shareholders own the company and they appoint the directors who in turn appoint the managers. When companies raise capital by attracting new investors, these new shareholders will, with the current shareholders, want to make sure that their interests are served by a competant board of directors.
