A board of director has legal responsibility for making top-level decisions. This includes the hiring and firing of the CEO, directing the strategic direction of the business and ensuring that the company is meeting its goals. The majority of them are executive officers, both sitting and former as well as experts and respected individuals who are chosen from the larger community (called outside directors), and it is the one who sets corporate governance standards.
A well-functioning board is one that has a clear goal and is able to operate with open communication and respect for the diverse views of its members and accountability to shareholders and other stakeholders. It also has independent board members that are free from conflicts of interest and have an overall view of the company’s future. The importance of having a formal orientation, developing relationships with members, and having meetings on time is crucial.
A good board member is not only business-savvy, but also intellectually curious. They are able to pose constructive questions to the management as well as to other members that challenge their thinking and lead to the best decisions. Being a specialist, such as sales or capital-raising expertise can be a great advantage.
Boards are increasingly taking up new responsibilities, such as strategic planning, resilience and risk management. They also have to tackle issues related to diversity and inclusion as well as digitalization and technology. They should be more technologically proficient, and play a larger role in the hiring of CEOs and other senior leaders. According to McKinsey COVID-19’s pandemic taught boards to be more proactive in addressing crisis and preparing for uncertainty.