An effective Board of Directors is a key part of a productive corporate governance system. In this article, we are going to discuss the main board member responsibilities.
General provisions on the board of directors
The Board of Directors is the main governing body of the enterprise in the periods between the general meeting of shareholders of the enterprise. The main task of this structure is to develop a business development strategy, as well as control over its implementation by authorized departments of the company.
Despite a large amount of authority, the board of directors, as a rule, does not directly affect the work of the executive structures of the enterprise. It must carry out its activities on the basis of the company’s charter, as well as local regulatory sources – such as, first of all, the Regulations on the Board of Directors, which is adopted by the general meeting of shareholders of the company. The main function of the considered internal corporate structure is the management of the company’s activity, in particular, the joint-stock company.
The main function that characterizes the work of the board of directors of a modern enterprise is to determine the strategy of its development. That is, long-term priorities are set in the development of the firm. At the same time, managers who are members of the Board of Directors can pay considerable attention to solving current problems, considering the current economic situation, taking into account which the business is built. But, one way or another, the task of the board is to approve long-term development plans for the company.
More about board member responsibilities
The board is defined as the body that manages the company and represents the company in relations with third parties, as well as the right to make any decisions other than those referred to the powers of the general meeting. Despite all legal, political and internal differences, there are 5 key board member responsibilities:
- determination of the strategic direction and policy of the company’s development;
- ensuring personnel policy for senior management;
- control, monitoring, supervision of the company’s activities;
- protection of the rights and interests of shareholders;
- decision-making on the use of resources, investments.
The Board of Directors must have the resources to fulfill its responsibilities to shareholders. Many boards establish internal committees to assist in the performance of their functions. In general, the Board of Directors must meet several basic criteria, which include proportional representation of all categories of corporate rights holders, the ability to influence the activities of the executive director, access to internal company information, and evaluations of the company, current control of managers.
In order to exercise its oversight powers, the Board of Directors often develops flexible decision-making systems regarding investments, costs, and contracts with clients. The degree of flexibility and detail may vary depending on the size of the railroad and the Board’s trust in the executive director and management.
The Board of Directors is directly responsible to shareholders for the company’s performance. Typically, in private companies, the Board of Directors reports to shareholders through quarterly financial performance reports, annual reports, and at the annual shareholders` meeting. Quarterly and annual reports must comply with the legal requirements of the administrative-territorial unit, and, possibly, the requirements of the financial community, especially if the company’s shares participate in open exchange trading. The board must ensure that all reporting requirements are met, and must also inform shareholders about financial and operating performance, strategy, markets, and other matters affecting the company’s operations.