A board of directors is
a body of elected or appointed members who jointly oversee the activities of a company or organization.
Other names include board of governors, board
of managers, board of regents, board
of trustees, and board of visitors. It is often
simply referred to as "the board".
A board's activities are determined by the powers,
duties, and responsibilities delegated to it or conferred on it by an authority
outside itself. These matters are typically detailed in the organization's bylaws.
The bylaws commonly also specify the number of members of the board, how they
are to be chosen, and when they are to meet.
The boards are directly
accountable to the shareholders and each year the company will hold an annual
general meeting (AGM) at which the directors must provide a report to
shareholders on the performance of the company, what its future plans and
strategies are and also submit themselves for re-election to the board.
The objects of the company
are defined in the Memorandum of Association and regulations are laid out in
the Articles of Association.
The board of directors' key
purpose is to ensure the company's prosperity by collectively directing the
company's affairs, whilst meeting the appropriate interests of its shareholders
and stakeholders. In addition to business and financial issues, boards of
directors must deal with challenges and issues relating to corporate
governance, corporate social responsibility and corporate ethics. Typical
duties of boards of directors include: governing the organization by
establishing broad policies and objectives; selecting, appointing, supporting and reviewing the performance of the
chief executive; ensuring the availability of adequate
financial resources; approving annual budgets; accounting to the stakeholders for the organization's performance. setting their own salaries and compensation In addition to considering the foregoing
measures, the board may also want to focus on identifying external pressures
that can push a company to take excessive risks and consider how best to address
those pressures. In particular, companies have come under increasing pressure
in recent years from hedge funds and activist shareholders to produce
short-term results, often at the expense of longer term goals. These demands
may include steps that would increase the company’s risk profile, for example through
increased leverage to repurchase shares or pay out special dividends, or
spinoffs that leave the resulting companies with smaller capitalizations. While
such actions may make sense for a specific company under a specific set of
circumstances, the board should focus on the risk impact and be ready to resist
pressures to take steps that the board determines are not in the company’s or
shareholders’ best interest.
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