Many of the sayings remind entrepreneurs and managers that it requires a solid team to build a successful company. For public companies, the board of directors is the ultimate team that takes on the entire responsibility for the success of the firm.
The board is accountable for making important strategic decisions, like merging with another firm or buying or selling shares, and distributing dividends. It also handles high-level finances including determining compensation for top executives and adopting or amending the annual budget. The board serves as a shield for the chief executive in emergency situations, providing advice.
A well-functioning board can be extremely valuable by serving as a sounding board for management giving objective feedback and a constructive way to challenge the management. This is particularly relevant for companies with complex operations or are heavily controlled (like financial services or healthcare).
Boards are expanding their responsibilities, taking on such issues as organizational culture and talent management. They also need to spend more time in a non-formal setting and be more digitally literate. This also means they must promote a culture of continual learning, according to McKinsey senior partner Frithjof Lund.
As a result, it’s more crucial than ever before that companies choose directors who are both competent and ethical. They should be experts in the field of business and committed to the company’s mission. They should also be able manage the time commitments that is required, including working on committees and serving as an ambassador for the company. They must also be aware of the importance of a healthy balance between a board member’s personal and professional life.
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