The Role of a Board of Directors in Corporate Management

A board of directors (also called a “board” or “BoD”) is an elected group of individuals by the shareholders of a company to represent their interests. Board members establish policies for overall company oversight and management, while also protecting shareholder assets. The board acts as a liaison between a company and its investors, overseeing and ensuring that the business is operating in a legal and responsible manner.

This includes setting the tone for the entire organization from the top by establishing the essential rules of ethics. It also approves the corporate plan of action which is designed to create long-term sustainable value, selects and supervises the CEO and top management for the operation of the company’s business, including allocating capital and addressing risks.

The board also scrutinizes financial reports and ensures compliance with regulations and laws. It also communicates with all stakeholders, such as employees suppliers, customers and employees, and with the local community to understand their concerns.

The company’s board should include a mix of insiders and outside members, with a mix of gender, age, and ethnicity. Companies with a greater diversity of board members usually do better financially. This is because boards with a diversity of members are more likely to have a variety of perspectives and opinions which can lead to better decisions.

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