A board of directors is a group elected by shareholders that represents shareholders and owners and serves as a fiduciary in order to protect their investment. They develop a strategic plan for the company and supervise management by regularly meeting with and supporting the top executives, including the CEO. They also develop governance systems by appointing officers to specific posts such as chair or president of the board.
In general, boards consist of a mix between both outside and inside members. They are familiar with the inner workings of an company. They also include people who aren’t employees, but are experts in a specific field. Certain countries have laws that govern the structure of the board of directors of a company. These laws set guidelines for the number of members who are elected to the board and for how long the terms of their tenure.
The Boards are responsible for establishing corporate policies, like supervision and management, deciding whether to issue dividends, stock options or other plans to repurchase shares, hiring/firing of top management, and also bringing in or firing new members. They also make major decisions such as mergers and acquisitions and also appoint committees that focus on specific tasks, like audit or compensation.
A key responsibility is to protect shareholder interests through transparency and timely precise disclosure, especially in financial reporting. Therefore, it’s crucial that a company has a strong board of directors to ensure its long-term viability and success. Investors must also be aware of the role and process for election of the board of directors since their actions can have a significant impact on a company’s profitability.