Three Core Obligations of a Board of Directors and Stakeholders
The board of directors supervises and advises an organization. It operates independent from company management and makes the decisions that ensure that the business is successful. The board ensures that the organization is legally operating and in the best interests of employees, investors and other stakeholders. The Board members must possess broad skills and experience, and develop a culture of trust and transparency.
A board’s structure, size and membership vary according to the kind of business entity, whether it’s publicly traded (a public company) or not publicly traded (private or limited) or owned by employees or family members (family or employee-owned) or tax-exempt (a charity or a nonprofit). The rules that govern a board’s management are specified in the articles of incorporation, or other bylaws.
The board’s primary obligation is to fulfill three core obligations:
A well-rounded board consists of people with diverse backgrounds and experiences. They are experts in their fields however, they are also generalists who are able to think from a helicopter’s viewpoint. They are prepared to ask hard questions and challenge the management’s assumptions. The best boards also promote diversity and encourage collaboration, communication, and trust.
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