The Importance of a Well-Designed Board of Directors

A board of directors is an institution which oversees and safeguards the long-term interests of its shareholders. A well-functioning board, comprised of people with diverse skills and experience is crucial to any business.

Traditionally, boards have endorsed and approved strategies suggested by executives while overseeing management teams. Now, however a well-designed board of directors can provide leadership on crucial issues like corporate strategy and vision managing risk and opportunities in addition to innovation, talent sustainability, and succession for leadership.

The board of directors for a company is usually comprised of both inside and outside members. Outside directors are those who is not employed by a company. To be considered an independent director, one should not have material ties with the company.

When you’re assembling your board, make sure you choose people who are enthusiastic and experienced in your industry. In addition, it is important to include a mix of people with different skills that can contribute to creative problem solving as well as strategic thinking. Also, you should look for experts in specific areas such as finance, marketing and capital raising.

It is important to realize that you are legally accountable and have fiduciary responsibilities as an officer. If you’re shareholder, you also have the power to cast a vote for board members during the proxy voting season. If you’re planning to vote for a board member, make sure to study their proxy forms carefully and verify that they are independent.

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