What are the board of directors’ responsibilities? Everything you need to know.
Regardless of the size of an organization, the board of directors will play a pivotal role in defining the company strategy and leading it to success. Given that the board underpins the objectives and overall direction of an organization, it is essential to define roles and responsibilities within the board, so that directors can best support their company’s goals.
From individual roles to the fundamental duties of the board that outline a company’s direction, we’ve outlined the board of directors’ responsibilities in the guide below.
Board of directors’ responsibilities
The board of directors has many important roles; the directors are not simply leaders in name; they have many responsibilities to ensure the success of the company and to protect the interests of shareholders while maintaining stakeholder engagement.
Oversee the hiring of senior management - The board of directors manages the hiring and dismissal of senior executives and managers and will participate heavily during the hiring process to ensure the best possible candidates fill the leadership roles within an organization. On top of this, the board will decide upon compensation for senior leaders.
Identify and manage risks - Risk management and mitigation is a large part of a board director’s role. The board must identify potential risks and establish effective policies that respond to risks across several areas including the financial, technological, and security spheres.
Set business strategies - One of the main board of directors’ responsibilities is to create and oversee the overall business strategy. The board will continually review and amend strategies based on business performance and current trends, ensuring that the organization is able to reach its goals.
Oversee finances - The board oversees the organization’s finances, ensuring that financial plans are set in place to control budgets, respond to industry and global changes, and ensure shareholder and stakeholder interests are protected.
How to get on a board of directors
Getting elected to a board of directors is no easy feat. It takes years to build up the relevant experience and knowledge that makes an individual eligible to hold a role on a board. The following skills and experience are favorable for aspiring board directors:
Relevant experience in the industry
Experience in holding leadership roles or roles on committees such as an executive committee
A strong network circle
Interest in holding a board position
Excellent leadership skills
Who is on the board of directors?
The board of directors consists of individuals who are elected by shareholders as well as ex-officio board members such as CEOs. Directors can work at the company internally or externally, but every board should assign directors to the following roles:
Chairperson: The chairperson or chair of the board manages the board, leads meetings, and helps keep the board focused so they can make effective decisions and meet shareholder goals. If an organization has several committees or boards, such as an executive committee, the chairperson will also act as a representative of the board when liaising with these committees.
Vice-chairperson: The vice-chairperson supports the chairperson in their duties. The vice-chair will also fill in for the chair of the board if necessary.
Secretary: The secretary is responsible for the board’s administrative tasks and will prepare meeting books and take minutes. However, the board secretary doesn’t always need to be a board member, and often the role will be assigned to an outside employee.
Treasurer: The treasurer’s role is dedicated to overseeing the company’s finances, developing a financial strategy, and ensuring the company keeps on top of its financial obligations such as taxes.
Which is a higher position: Board of directors or CEO?
The board of directors and the CEO work together to set strategies, achieve goals, and ensure the success of the business. The CEO often serves ex-officio on the board, meaning they automatically join the board due to their position within the business. However, this doesn’t mean the CEO outranks the board; in fact, the board of directors can remove a CEO from their position if there is cause to do so.
In summary: What does a board of directors do?
In short, the board of directors is a shareholder-elected group that oversees a business’ strategies and objectives, working to ensure that goals are achieved and best represent shareholder and stakeholder interests. Unlike higher management, the board does not get involved with the daily operations of a business, but instead ensures long-term growth and success.
Boards of directors are now facing more challenges than ever due to the changing economic and business landscape. BoardWorks™ is Computershare’s board management software, specifically designed to assist board members carry out their roles, by transforming board engagement, increasing productivity, and ensuring documents are kept in a safe place. To find out more about how BoardWorks can help your board effectively govern, contact our team today.