There are a myriad of sayings that remind managers and entrepreneurs that it takes a team to build a great company. For public companies the board of directors is the only team that takes on the entire responsibility for a firm’s success.
The board makes crucial strategic decisions like merging with other firms, acquiring or selling shares and distributing dividends. It also deals with high-level finance, such as the setting of compensation for top executives or approving the annual budget. The board also acts as a buffer in crisis situations, providing direction to chief executives.
A well-functioning board provides tremendous value to the business by acting as a soundingboard for management, giving impartial feedback, and offering constructive suggestions for improvement. This is especially crucial in companies that have a complex business model or highly restricted by law (like financial services and healthcare).
Increasingly, boards are expanding their responsibilities to take on issues such as organizational culture and the development of talent. This means they need to be more digitally literate and work more outside of formal meetings. Frithjof the McKinsey senior consultant, says that they must also promote a culture that is constantly learning.
This is why it’s more crucial than ever before that companies choose directors who are both competent and ethical. They should be knowledgeable about the field of business and committed to the company’s mission. They must also have the ability to manage their time, which could include participating in committees or acting as an ambassador for the company. They should also be aware of the importance of maintaining a balance between a board’s work and personal life.