Board of directors spearhead any business organization, as they govern companies. They are the policymakers, and technically, they decide the fate of an enterprise. To make critical business decisions easier for them, board portal software comes into play.
In this article, we’ll learn about the main roles and responsibilities of boards of directors — and how technology, such as board management software, helps to carry out those duties effectively.
What is a board of directors?
A board of directors is a group of elected people who represent the shareholders. Directors are elected by the investors or shareholders in the company to represent their interests and assume the leadership of the company or corporation.
The board is the governing body in any corporation. In a general sense, the board of directors has three primary responsibilities:
- Represent shareholders’ interest
- Protect company assets
- Make a good return on investment made by the shareholders or investors
Do all corporations need a board of directors? According to the legislation, public companies must have a board of directors while it is optional for private companies.
What are the functions of the board of directors?
Governing a corporation, especially a public company, needs professional skills of the highest levels. However, technological refinements and digital tools, such as the board of directors software, made governance a whole lot easier for them.
A board has a lot of major and minor responsibilities on its shoulders, but here are some of the most important functions of it.
- Hire, supervise, and compensate CEO
Once the board panel is in order, the first task at hand is to appoint or hire a CEO for the company. Directors are entitled to hire and fire the CEO.
Directors can set different parameters or standards for selecting the CEO according to their motives. For instance, if they want to boost the company’s digital presence, they would prefer someone with proven experience in digital marketing in the relevant industry.
The board also determines the compensation for the CEO.
- Create company’s vision
The board of directors is responsible for creating the company’s vision, mission, corporate values, and culture. To pursue that vision, the board develops short-term and long-term goals for the future.
The board generally arranges physical or virtual meetings (using online platforms like board management software) to review and reinstate the company’s vision and its importance to the employees and make sure they have the required tools and resources to achieve the company’s goals.
- Manage board members
Directors are also responsible for managing each other. i.e., other board members. Board members, depending on the circumstances or business needs, may hire or release their colleagues from the board.
For example, if the board believes that it needs additional support in a particular section or project of the company, it may hire new personnel or promote someone from the company to do the job.
Maintaining transparency in board operations can be very challenging for the board. It is vital to keep track of what other board members are doing. One way to manage board members effectively is to use virtual boardroom software. Board room software helps the board ensure maximum transparency, improves collaboration between board members, and automates board document management.
- Establish rules of governance
The board of directors sets the governance rules; that includes how board members will govern each other and manage all the decisions that will have a major consequence on the corporation. This may consist of certain things such as:
- Time of meetings with the board and the CEO
- Standardized process to add or remove board members
- Individual status meetings
Modern boards are switching to online channels to conduct monthly meetings. Obviously, virtual board meeting management is efficient for a company’s financial resources. That is why boardroom software is gaining popularity in both private and public corporations.
- Make financial decisions
Board members can make important financial decisions that may affect the company. Yes, organizational departments are entitled to make financial decisions as they deem fit.
However, the board decides when it comes to investing or divesting in another company, entering into a partnership, acquiring a new business entity, merging into another cooperation, or making a capital investment such as buying a new asset or building.
- Allocate and protect company assets
Shareholders or investors entrust board members with their funds, and the board is expected to utilize those resources in the best possible way to serve the business. BOD can decide where to use the funds, which tools to buy, where to place employees, etc.
The board decides the budget for every department or section in the organization according to the company’s strategic goals or mission.
For instance, if the board wants to generate more revenue through social media channels, they will allocate more budget to digital marketing and invest in advanced algorithm tools to reach customers better.
If the board wants to minimize board expenses, such as meeting costs, papers costs, etc., they will look to more cost-efficient ways such as board management software. In short, the board is expected to utilize company resources most efficiently.
In addition to that, here are some other substantial functions of the company board:
- Ensure legal compliance
- Improve public opinion
- Oversee finances
- Set corporation goals
- Invest in company programs to improve organizational efficiency
- Define strategies
Final words
The board of directors is the think tank of the corporation, as they drive the company to success or failure. They are responsible for making principal financial decisions, setting company policies, strategies, and goals. Therefore, It is essential to invest in new technologies like board portal software to help the board for better governance.
