There are numerous sayings that remind managers and entrepreneurs that it takes a team to create a great business. For public companies the board of directors is the only team who is accountable for the success of the firm.
The board is responsible for taking important strategic decisions such as merging with a firm and buying or selling shares, or declaring dividends. It also oversees financial matters at the highest level, such as determining the compensation of top executives or approval of the annual budget. The board also acts as a shield in crisis situations, offering advice to chief executives.
In addition, a well-functioning board can provide tremendous value by acting as a summing board for management offering objective feedback, and providing constructive criticism. This is particularly relevant when you have a complex business or are heavily restricted (like healthcare or financial services).
Boards are increasing their responsibilities, and are now tackling issues such as organizational culture and talent management. They must also spend more time away from formal meetings and become more technologically proficient. This also means they must cultivate a mindset of continuous learning, says McKinsey senior partner Frithjof Lund.
It’s more crucial than ever before that companies choose directors who are ethical and competent. They must have a thorough understanding in the field of business they work in and a commitment to the company’s goals. They must also be able manage the time commitments that is required, including participating in committees and acting as an ambassador for the company. They should also understand the importance of a healthy balance in a board member’s professional and personal life.
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