2. Master the basics of the business. New board members should familiarize themselves with the details of the company`s business model, strategy, finances and senior management. It`s helpful to get to know the company and your management team a few days before your first board meeting. If you can apply SWOT analysis – assessing strengths, weaknesses, opportunities and threats to the business – to your self-education, you can start your service from a position of strength. Presidents generally prefer not to have difficult and challenging questions, especially at board meetings. And directors adhere to and accept limited and passive roles by serving as sources of advice and guidance, providing some kind of disciplinary value, and only taking action when the conditions of a crisis are constrained to do so. Some presidents found external advisors useful in developing appropriate and relevant criteria for measuring senior management performance. Once the President has prepared what he considers to be appropriate criteria, these must be submitted to the Board of Directors for discussion, approval and commitment. Most boards and most individual directors are very reluctant to face the unpleasant conclusion that the president of the company needs to be replaced. While inconvenience is sometimes avoided by hiring external consultants or resigning from the board, there are situations where board members who have been slow to act face the task of asking the president to resign.
These situations are relatively rare. The structure and powers of a board of directors are determined by the articles of association of an organization. The by-laws may determine the number of board members, how the board is elected (e.g. B by a vote of shareholders at an annual meeting) and the frequency with which the board meets. While there is no fixed number of members for a board of directors, most range from three to 31 members. What is the definition of a board member? The members of the Board of Directors are elected by the Shareholders of the Company and are responsible for defining the Vision of the Company and appointing the Chief Executive Officers to implement that vision. Each Board member attends Board meetings where discussions take place on performance, critical barriers, turnarounds and future strategies. In other words, they are responsible for the overall direction of the company. There are several ways to remove a board member.
The most common is the vote of the members of the board of directors. The company`s bylaws should include details on the type of voting required for this share: For more than a quarter of a century, I have observed, served and studied the members of the board of directors. In doing so, I have developed a healthy skepticism about the dominant and generally accepted concepts of boards. Which confirms my experience, in fact, has little to do with conventional statements about their proper functions. Sometimes, but not too often, the advice and guidance of a board member results in a review or change in the commitment or decision of a management. Occasionally, but only very rarely, the advice and advice of a member of the board of directors leads to a reversal of a management obligation or decision. The legal responsibilities of directors and board members vary by type of organization and across jurisdictions. For publicly traded companies, these responsibilities are generally much stricter and more complex than for companies of other types. As with any business, the board of directors of a nonprofit has three main legal obligations known as the “duty of care,” “duty of loyalty,” and “duty of obedience.” I have found that many companies have statements about the functions of their boards of directors, but the job descriptions of board members are generally broad, vague, meaningless, and generally unknown to board members.
In addition, functional descriptions generally include “The board of directors is intended to represent and promote the interests of shareholders,” but statements do not describe what directors do when representing the interests of shareholders. In addition, I have found that relatively small functions, referred to by some administrators as “legal waste”, are often mixed with important functions. . review the company`s long-term strategy annually; Confirm the suggested direction or changes of direction. I have found that boards of directors play an advisory role in choosing a new president – in their capacity as a corporate conscience. The process of electing a new president requires a vote of the board of directors, and the president usually observes the conveniences of corporate good manners by discussing his election with individual members before the meeting. It is rare for a board of directors to reject a presidential candidate who is recommended by the president. According to the Corporate Library study, the average board size of a publicly traded company is 9.2 members, and most boards are between 3 and 31 members.
According to Investopedia, some analysts believe that the ideal size is seven. [48] State law may establish a minimum number of directors, a maximum number of directors, and qualifications for directors (for example. B if the members of the board of directors must be individuals or may be business units). [49] [50] Typical external directors of the garden variety, chosen by the chair and usually by members of a peer group, do not ask questions inside or outside board meetings. However, directors who sit on corporate boards because they own or represent ownership of significant shares typically ask difficult questions. Their willingness to question the presidents is partly a manifestation of the split in the de facto control powers of these companies. Directors of large shareholders generally do not sit on the board of directors because the president wants them, but because they can force their way to the board through cumulative voting procedures. Independent or external directors are not involved in the day-to-day internal running of the company. These board members are remunerated and usually receive additional remuneration for their participation in meetings. Ideally, an external director provides an objective and independent view of corporate objectives and dispute resolution. When setting up a board of directors, it is considered crucial to find a balance between internal and external directors.
The Board of Directors communicates its strategic decision to the CEOs, who will begin to implement the company`s new objectives. Directors, as described in the literature, represent shareholders. As a general rule, however, they are actually chosen by the chairman and not by the shareholders. Therefore, directors sit on the board of directors because the president wants them. Implicitly, and often explicitly, directors actually represent the president. .