A board of directors (also known as»BoD» or «board» or «BoD») is an association of people who are elected by the shareholders of a company to represent their interests. Board members establish guidelines for the supervision and management of a company, as well as protecting shareholder assets. The board is an intermediary between a company and its investors, overseeing and ensuring that the business operates in a legal and responsible manner.
This includes setting the tone for all employees at the top, by establishing the basic rules of ethical conduct. It approves corporate plans that aim to create long-term sustainability, chooses the chief executive officer, and supervises the CEO as well as senior management in the operation of the company’s operations, including the allocation of capital for growth as well as assessing and managing risks.
The board also reviews financial reports and makes sure that the company’s activities are in line with the laws and regulations. It also communicates with all stakeholders, such as employees suppliers, customers and employees, and the local community in order to understand their concerns.
It is important for a board of directors to comprise both outside and inside members, who are the right mix of gender, ethnicity and age. In reality, companies with more diversity on their boards tend to perform better financialally than those that don’t. This is because boards with a diversity of members are more likely to offer a variety of opinions and perspectives that lead to better decisions.