What does a company’s board of directors do?

Takeaway: A company’s board of directors is the governing body of the company. It acts as a check on the CEO and has to approve a variety of corporate actions. Typically, the board of an early-stage company is comprised of its founders.

A company's board of directors is responsible for setting the overall strategic direction of the business, overseeing its operations, and protecting the interests of its stockholders. In this post, we’ll outline the responsibilities of a company's board of directors.

Sets the Strategic Direction

The board of directors is responsible for setting the overall strategic direction of the business. This involves identifying the company's mission, vision, and goals, and developing a long-term plan to achieve them. It also includes establishing the principal operational and financial objectives and strategies of the company and reviewing the results of the company’s operations against those objectives. The board may also be responsible for approving major business decisions, such as mergers and acquisitions or significant investments.

Oversees the CEO and Management Team

The board of directors is responsible for overseeing the CEO and management team to ensure that they are executing the company's strategy effectively. This may involve evaluating the CEO's performance, setting compensation, and providing guidance and support as needed. The board may also be responsible for appointing and removing members of the management team.

Protects the Interests of Stockholders

The board of directors has a fiduciary duty to protect the interests of the company's stockholders. The board is required to use independent judgment to make decisions in the best interest of the company’s stockholders. This involves ensuring that the company is being managed in a way that maximizes stockholder value, and that the company is complying with all relevant laws and regulations. The board may also be responsible for evaluating and approving major financial transactions, such as equity offerings or stock buybacks.

Provides Oversight and Risk Management

The board of directors is responsible for providing oversight and risk management to ensure that the company is operating in a safe and ethical manner. This may involve reviewing financial statements, evaluating internal controls, and monitoring the company's risk exposure. The board may also be responsible for establishing and enforcing policies related to ethics, compliance, and corporate social responsibility.

Acts as a Link to External Stakeholders

The board of directors is often responsible for acting as a link between the company and its external stakeholders, such as investors, regulators, and the public. This may involve communicating the company's strategy and performance to stakeholders, engaging with investors, and responding to concerns raised by regulators or the public.

Conclusion

A company's board of directors is responsible for setting the overall strategic direction of the business, overseeing its operations, and protecting the interests of its stockholders. The board provides oversight and risk management, acts as a link to external stakeholders, and ensures that the company is being managed in a way that maximizes stockholder value. The board plays a critical role in the success of the company, and it's important for the board members to have the skills, experience, and expertise necessary to carry out their responsibilities effectively.