The Role of a Board of Directors in Corporate Management

A board of directors, also referred to as “BoD” or a “board”, is a group of persons elected by shareholders to represent the interests of that company. The board members formulate guidelines for the supervision and management of a company, as well as protecting shareholder assets. The board functions as a liaison between a company and its investors, supervising and ensuring that the company operates in a legal and responsible manner.

This includes establishing foundational rules for ethical conduct and setting the tone at the top of the entire company. It approves corporate policies that are designed to create sustainable long-term value, selects a chief executive officer who supervises the CEO and senior management in running the company’s operations, including the allocation of capital to expand and assessing and managing risks.

The board also scrutinizes financial reports and ensures compliance with regulations and laws. In addition it communicates with all key stakeholders, such as employees customers, suppliers and the local community as well as others, to comprehend their concerns and aims to have a positive impact on those communities.

It is important for a company’s board of directors to have both outside and inside members, as well as the right mix of gender and ethnicity as well as ages. Companies with a greater diversity of board members usually do better financially. A diverse board is more likely not to offer a variety of perspectives and opinions that can lead to better decisions.