Board of Directors

A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations (including the jurisdiction's corporations law) and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet.

In an organization with voting members, the board is accountable to, and might be subordinate to, the organization's full membership, which usually vote for the members of the board. In a stock corporation, non-executive directors are voted for by the shareholders, with the board having ultimate responsibility for the management of the corporation. The board of directors appoints the chief executive officer of the corporation and sets out the overall strategic direction. In corporations with dispersed ownership, the identification and nomination of directors (that shareholders vote for or against) are often done by the board itself, leading to a high degree of self-perpetuation. In a non-stock corporation with no general voting membership, the board is the supreme governing body of the institution, and its members are sometimes chosen by the board itself.

Other names include board of directors and advisors, board of governors, board of managers, board of regents, board of trustees, or board of visitors. It may also be called "the executive board" and is often simply referred to as "the board".

Typical duties of boards of directors include:

  • governing the organization by establishing broad policies and setting out strategic objectives;
  • selecting, appointing, supporting and reviewing the performance of the chief executive (of which the titles vary from organization to organization; the chief executive may be titled chief executive officer, president or executive director);
  • terminating the chief executive;
  • ensuring the availability of adequate financial resources;
  • approving annual budgets;
  • accounting to the stakeholders for the organization's performance;
  • setting the salaries, compensation and benefits of senior management;

The legal responsibilities of boards and board members vary with the nature of the organization, and between jurisdictions. For companies with publicly trading stock, these responsibilities are typically much more rigorous and complex than for those of other types.

Typically, the board chooses one of its members to be the chairman (often now called the "chair" or "chairperson"), who holds whatever title is specified in the by-laws or articles of association. However, in membership organizations, the members elect the president of the organization and the president becomes the board chair, unless the by-laws say otherwise.

Tags: Business