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 the company. Board members create guidelines for the supervision and management of a company, while protecting shareholder assets. The board serves as a link between the shareholders of the company and the company making sure that the business is run in a legal and responsible way.
This is a way of setting the tone for the entire company from the top with the basic rules of ethical conduct. It approves corporate strategies that aim to create sustainable long-term value, selects a chief executive officer who oversees the CEO and upper management in operating the company’s business, including allocating capital to grow and assessing and managing risks.
The board also reviews financial reports and makes sure that the business’s operations are in compliance with the law and regulations. It also communicates with all stakeholders, such as employees customers, suppliers and customers, and the local community, to be aware of their concerns.
It is crucial that a company’s boards comprise both outside and inside members, as well as a mix of gender and ethnicity, as well as age. In reality, companies with more diversity on their boards tend to perform better financially than those that do not. This is because a diverse board is more likely to have a variety of opinions and perspectives that can result in better decisions.