"Boards of directors serve as a source of advice and counsel, offer some sort of discipline value, and act in crisis situations," said Myles L. Mace, Harvard Business School Professor and pioneer in corporate governance studies.
This sums up the purpose of the board of directors, but who are included, what are their roles, and, most importantly, how can they run effective meetings?
Read on to find out more about board members and how they can achieve their purpose, as eloquently stated by Myles Mace, through effective meetings.
What is a board of directors?
A board of directors is a group of people who decide on an organization's main strategies and create corporate policies for chief officers to manage their teams.
It's the highest hierarchal level in a corporate body where the board's main objective is to oversee the shareholders' interests by ensuring the company achieves its set goals.
All publicly traded companies are legally required to have a board of directors, although some private and non-profit corporations may choose to have a board to set strategies implemented by the top management.
What are the types of board of directors?
To serve its purpose, a board of directors must include individuals with a wide range of expertise.
Potential board members should come from inside and outside the company to provide objective opinions in board meetings.
Internal directors can be chief executives or top managers in the company. They represent the interests of shareholders as well as employees and other managers.
This role is usually unpaid because they already work as chief officers and may even have shares in the company.
External directors don't work in the company, but they contribute with their much-needed expertise by providing their unbiased opinions.
Since these board members have no stakes, shares, or roles in the company, they are paid for their consultatory services and contribution to board meetings.
There are different types of board of directors depending on the company's purpose:
1. Governance board: Leading authority in the company that provides guidelines to the top management to implement their strategies.
2. Executive board: Manages day-to-day operations and sets short- and long-term strategies.
3. Fundraising board: Nonprofit board members with a network of acquaintances who can support their cause by making major donations.
4. Advisory board: Individuals with certain expertise who consult the main board.
5. Working board: Doubles as company employees and board of directors, typically in small companies or startups.
6. Policy board: Sets company policies and oversees employees' and managers' compliance with the bylaws.
These examples are the most common types of boards, but they can have different names and responsibilities depending on the company's main objectives.
For any board type, communication is key when it comes to conducting board meetings. Due to the pandemic, virtual meetings have become the common method of communication. Additionally, board members may not sometimes be able to physically attend meetings due to their busy schedules.
💡This is why using an all-in-one board management platform can guarantee efficient board meetings.
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Now, let's dive into further details about the core functions of the board of directors in corporate governance.
What is the role of boards of directors?
Value-added business boards steer companies in a direction of growth and development by not only setting the rules of the game but also outlining methods to follow these rules to a path of success.
The duties and responsibilities of the board of directors include the following:
1. Upholding the interests of shareholders
The main purpose of the board is to oversee the shareholders' interests in the company. They form strategies that protect their assets, create corporate policies for their shares and buyouts, and offer their insights and points of view to the chief executives to achieve the set goals.
2. Founding the company's mission and vision
As the uppermost hierarchical level, the board of directors is responsible for setting the mission and vision statements of the company.
Many board members also supervise the procedures followed across the company's structure to ensure these statements are fulfilled.
In board meetings, chief executives answer to the board members by sharing their reports of the company's performance.
3. Making critical decisions
One of the main roles of the board of directors is making important decisions regarding corporate investments and the company's structure like downsizing and merging with or acquiring other companies.
The corporate board also decides who to hire as chief executives, if they need to replace the current ones, and how much compensation they should receive, as they also must approve the annual budget.
4. Conducting shareholders' meetings
Since the board of directors is concerned with the shareholders' interests, it's their job to hold a meeting every year to inform them of any new members, hiring or firing of chief executives, their dividends, and if there are any changes in the company's policies or structure.
5. Managing risks and crises
When any major risks or challenges occur in the company, the board sits together to discuss how they should best approach these problems.
Risk and crisis management are among the main roles of company directors, and the chief execs turn to them to make these decisions that could make or break an organization.
6. Forming board committees
Sometimes, the board assigns a committee of specialists to solve a particular problem in the company, which needs focused attention, or put them in charge of certain matters.
Some board committee examples include audit, communications, finance, governance, and bylaws.
The committee leaders may be present in some board meetings if necessary, but they usually share the main headlines of their reports and outcomes.
Now, let's take a look at the positions and titles of the board members and their job descriptions in brief.
What are the board of directors positions?
The number of board members should ideally not exceed ten members, with five to seven individuals being optimal. Here's a board of directors example of the positions that exist in most organizations.
This is the highest rank across the board and is responsible for managing board meetings and assigning committees to run the business.
The chair of the board collaborates with the CEO on different matters of the company when setting the main strategies and policies. Oftentimes, the CEO is elected by the board to be the chairperson.
This position may or may not be available on the board, but their job is to support the chair in their decisions by consulting them using their expertise and unique perspective on how the company should be run.
The vice-chair takes the role of chair in case of their absence so they must be competent to fit this role at any given time.
3. Managing director
This position is a direct report to the chief executives, who typically vote on an individual to manage the business aspects of the company and oversee the overall performance.
4. Board secretary
The secretary's job is to uphold the bylaws and regulations created by the board. They are responsible for recording board meeting minutes, bringing the past records to the board's attention before every meeting and scheduling the board of directors' meetings.
5. Non-executive director
This position can be given to several people to provide an unbiased, fresh perspective on the matters discussed in a board meeting.
The board members are considered the company insiders, so it's useful to have an outsider perspective from non-executive members, who aren't part of the board but could speak on behalf of the shareholders.
They may also be appointed to lead board committees if they possess the necessary leadership and problem-solving skills.
A treasurer may be present among the board of directors to provide insights into the company's financial situation.
These reports are in the form of numbers and statistics that are clear and concise for the board to follow and make informed decisions. This position may be substituted by the Chief Financial Officer (CFO).
While the CEO may sometimes sit on the chair of the board, each position entails a different set of duties and responsibilities. So let's find out the difference between the two.
Board of directors vs CEO
The CEO performs actions based on the board of directors' strategies and policies to lead the company toward success.
In other words, while the CEO is the acting manager in front of the staff and the public, the board places all the major plans to run the company.
There must be a harmonious relationship between the CEO and the board, and while they may not always see eye-to-eye, presenting a united front is key to the company's growth and success.
Who is higher, board of directors or CEO?
As mentioned before, the board of directors is the highest level in an organization, which means that the board's authority is higher than the CEO. CEOs are hired or replaced by the board and sometimes they can be chosen as the board chair.
Now that we've established the board of directors from the inside out, how can they conduct effective board meetings?
Key to effective board meetings
📝If you think about running a board meeting, what are the elements that come to mind?
For one, you'll need to set a board meeting agenda with the main talking points, risks, challenges, and decisions that need to be made.
📝What about the programs you'll need to conduct this major meeting?
Virtual or not, any meeting involves using a few tools from scheduling to project-management, minute-taking, and note-taking. However, jumping from one tool to another can be distracting.
A solution to this is to use an all-in-one board management software, where you can have communication tools, meeting calendars, and note-taking, minute-taking, and video-conferencing features in case of a virtual meeting or if a board member is tuning in remotely.
💡With adam.ai, your board meeting can be organized before, during, and after the meeting, and here's how:
- Schedule the meeting and invite board members via Google Calendar, Office 365, or email.
- Run the meeting using the built-in video conferencing feature in adam.ai or integrate with your favorite communication platforms like Zoom, Google Meet, Microsoft Teams, Webex, and Slack.
- Upload your meeting agenda, time your agenda items using the meeting timer, and take notes in private or public to manage your entire meeting.
- Stay updated with the company's performance via integrations with project-management apps like Jira, Asana, and Trello.
- Create action items, manage action watchers, and manage your decisions by taking votes from the board members.
- Duplicate your meetings to save time and effort on setting repetitive board meetings.
- After the meeting, automatically generate meeting minutes and send the document to all the attendees with a click of a button.
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The bottom line
A board of directors is the top hierarchical level in an organization. Depending on the function and type of company, the board can have different names and responsibilities.
But no matter what their main purpose is, one thing is for certain: running a board meeting effectively is key in ensuring the board fulfills that purpose.
adam.ai is the ONLY all-in-one board management software to organize the entire lifecycle of remote, hybrid, and physical meetings (before, during, and after). Here are a few other reasons to choose adam.ai:
adam.ai is ranked a leader in the meeting management software category by G2 for both quarters, Summer 2021 and Winter 2021.
adam.ai has been included in the Forrester Report in the AI-enabled meeting technology landscape.
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