A board of director has legal authority to make high-level decisions. This includes deciding to hire and dismiss the CEO, overseeing the strategic direction and ensuring that the business is meeting its goals. The board is typically comprised of ex- and current executives as well as experts and respected individuals who are chosen from the community (called outside directors), and it is the one who sets corporate governance standards.
A well-functioning board has a clear purpose and operates with open communication with respect for differing views and a sense of accountability to shareholders and other stakeholders. It also has independent directors who are not entangled in conflicts of interest and who have a long-term view for the company’s growth. An official orientation process and building relationships with other members, and committing to meet at the right time are essential.
In addition to business acumen an effective board member is also a person with an intellectual curiosity and is competent to ask members and management questions that challenge group thinking and aid in making the best decisions. A board member’s experience in a specific field can be a great asset.
Boards are increasingly being asked to take on more responsibilities like strategic planning and risk and resilience management. They also have to tackle issues related to the issue of diversity and inclusion, technological advancements and digitalization. This means that they are required to be technologically adept and play an increased part in hiring and succession planning for the CEO and other senior leaders. According to McKinsey COVID-19, the pandemic has taught boards to be more proactive when dealing with emergencies and planning for uncertainty.
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