A board of directors bears legal responsibility for making high-level decisions. This includes appointing and firing the CEO, directing the strategic direction of the company and ensuring that the company is meeting its objectives. The board is typically comprised of ex- and current executives as well as experts and respected individuals who are chosen from the community (called outside directors) and is responsible for setting the guidelines for corporate governance.
A strong board has a clearly defined mission and is able to operate with open communication, respect for diverse viewpoints, and accountability to shareholders and stakeholders. It also includes directors who are independent who are free of conflicts of interest and have an eye on the long-term for the company’s growth. The importance of formal orientation, building relationships with members, and meeting at the right time is paramount.
A good board member is not only business-savvy, but also intellectually curious. They are able to ask thoughtful questions to the management as well as to other board members that challenge their thinking and help them make the right decisions. Experience in a niche, such as capital-raising or sales experience, can also be an advantage.
Boards are increasingly taking on additional responsibilities, such as strategic planning as well as risk and resilience management as well as diversity and inclusion and technology and digitalization. In turn, they must be technologically adept and play an increasing role in hiring and succession planning for the CEO and other senior leaders. The COVID-19 pandemic has taught boards to be more proactive when it comes to tackling crisis and preparing for uncertainty, according to McKinsey.
