How Does the Board of the Company Work?

In a publicly traded corporation The board of the company is the group of individuals who decides what the corporation does and the reasons for it. The board members are elected by the shareholders (the owners) to represent them and to look out for their interests. The board hires executives who manage the day-to-day activities according to the board’s instructions.

The primary function of the board is to ensure that the assets of shareholders and investors aren’t at risk. It frames guidelines for dividends and payouts, approves or denies the hiring and dismissal of managers at the highest level and changes corporate rules and conducts the annual shareholders’ conference.

The board is typically composed of inside directors who are officers of the company. There are also outside directors who don’t hold executive post. The Chairman of the Board preside over meetings, sets agendas and assigns tasks to the members. There are boards that have standing committees like the audit and compensation committees. These committees are typically required by law, or listed on the stock exchange.

Boards must find a way to balance the necessity to review and analyze information on a regular basis with their responsibility to concentrate on the bigger picture, not just day-to-day management. It is vital that boards recognize the specific obligations it is required to perform themselves, and which ones it can delegate. It is common for boards to create a schedule of reserved power that clearly outlines which tasks are solely the responsibility of the board and which that it can legally delegate to senior management.

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