Three Core Obligations of a Board of Directors and Stakeholders

A board of directors monitors and advises an organisation, is completely independent of the management and makes the decisions that help the firm thrive. The board ensures that the business is operating in accordance with laws and in the best interests of employees, investors and other stakeholders. Board members must have broad expertise and experience, and are expected to foster an environment of trust and transparency.

The structure, size, and members are contingent upon the More about the author type of business entity, whether publicly traded (a public company) or not publicly traded (private or limited), owned by family members or employees (family or employee-owned) or tax-exempt (a nonprofit or charity). The rules that govern each board’s governance are set out in the articles of incorporation, or other bylaws.

The primary responsibility of the board is to fulfill three fundamental obligations:

A well-rounded board is made up of members with a wide range of backgrounds and experiences. They are generalists, able to provide a helicopter’s perspective and yet experts in their particular areas of expertise. They are prepared to ask hard questions and challenge management’s assumptions. The best boards promote diversity and encourage collaboration, communication, and trust.