The Board of Directors and the Board of Management

A board of directors is a group that governs a business entity regardless of whether it is traded on the market (public company) or privately held, restricted to family members only (family company) or exempt from taxation on income (a tax-exempt nonprofit corporation). The powers, duties and responsibilities of the board are determined both by government regulations and the constitution and bylaws for an organisation.

Most presidents and outside directors agree that the role of the board is advisory rather than a decision-making nature; management oversees the business, and the board is an advisor and guidance to management. Outside directors are chosen for their expertise in specific areas of business, and to provide a perspective on the bigger picture that management may not have. Many smart presidents rely on the sources of advice that are represented on their boards — inside and outside of formal meetings — and are careful to select new directors for their desirable capabilities or areas of specialization.

The primary function of the board is to challenge the management, particularly when there are significant issues with boardroomtoday.net the economy or business. My research revealed that, even although many presidents claim to expect directors to ask discerning questions, they don’t often allow questions to be asked during regular board meetings. This is particularly true if they feel they are under attack from subordinates on the board and are in attendance at the meeting.