30 Aug All About Boards of Directors
Every publicly held company is required by law to have a board of directors. Unlike the participants in an advisory board, which is an informal committee of consultants who are appointed rather than elected, members of a board of directors have some fiduciary responsibility to the company they serve. A
corporate governance management firm like Mitratech can help you recruit candidates for board members who are well suited to advise your business.
How Are Boards of Directors Structured?
Businesses have a lot of leeway in structuring their boards, but however, they decide to do it, the structure must be described in the company’s bylaws. Company bylaws must stipulate:
• The number of board members: Boards can have as few as two members, and some corporate boards have had as many as 30 members. According to The Corporate Library, a think tank devoted to studying the role of governance, the average number of board members is nine. Ideally, the board should be made up of company stakeholders from both the management and the shareholder sides.
• Election protocols: Bylaws should provide strict guidelines for candidate eligibility as well as the candidate selection process. Members are usually elected by a shareholder vote that’s held in conjunction with an annual meeting.
• Calendar: The laws of the state where a company is incorporated will determine how often the company’s board of directors meets. Most boards meet at least once a year and may meet more often than that if the company is experiencing tumultuous times. Meetings must be announced a certain number of days in advance in accordance with the laws in which the company is incorporated, and a quorum of members is necessary before the meeting can proceed.
What Is a Board of Directors’ Duties?
Boards of directors don’t oversee the day-by-day operations of a company. Instead, they’re charged with providing oversight over policy decisions. These policies include:
• The company’s mission statement: A mission statement is a short description of a company’s business goals and competitive advantages over companies with similar goals. Board members are responsible for setting the mission and for changing the mission statement as necessary as the goals of the business evolve.
• Executive review: The board reviews actions taken by corporate officers and executives, judging them by how closely those actions adheredented in the mission statement. At the board’s yearly meeting, annual dividends are announced.
• Fiduciary responsibility: Board members’ fiduciary responsibilities are generally set by the common law of the state in which a business is incorporated. Board members are expected to pursue their fiduciary responsibilities in good faith without any conflicts of interest that might serve as an incentive for purely personal gain.