How Does the Board of the Company Work?

In a publicly traded corporation the board of directors of the company is the group of people who decide what the company does and the reasons for it. The shareholders (owners) choose its members to represent and safeguard their interests. The board hires executives who manage day-today operations according the instructions of the board.

The board’s main function is to ensure that the assets of investors and shareholders aren’t at risk. It establishes policies for dividends, approves or rejects hiring or firing high-level executives, amends corporate regulations, and also holds an annual shareholders’ meeting.

The board consists of both inside directors and directors from outside. The chairman of the board oversees meetings, sets agendas and delegates tasks to the members. There are boards that have standing committees such as the audit and compensation committees. These committees are usually mandated by law, or listed on the stock exchange.

Boards need to strike a balance between the need to examine details on a regular basis, and their responsibility to concentrate not only on day-today operations but also on the bigger picture. It is also crucial that boards recognize which of its duties it must and wishes to perform itself, and those which it can delegate to senior management. It is common for boards to come up with a schedule of reserved power that clearly states which duties are the sole responsibility of the board and what it can legitimately devolve to the senior management.