The Importance of a Well-Rounded Board of Directors

There are many quotes that remind managers and entrepreneurs that it takes a team to build a successful business. The board of directors are accountable for the success of public companies.

The board is responsible for making crucial strategic decisions, like merging with another firm purchasing or selling shares, and declaring dividends. It also deals with important financial matters, such as setting compensation for top executives or approving the annual budget. The board acts as a shield for the chief executive in crisis situations, by providing guidance.

Additionally, a functioning board can also be very valuable in the form of a sounding board for management offering objective feedback, and a constructive way to challenge the management. This is particularly important in companies with a complex business model or are highly controlled by law (like healthcare and financial services).

Boards are increasingly expanding their responsibilities, tackling issues like organizational culture and management of talent. They must also spend more time outside of formal meetings and become more digitally educated. This also means they must cultivate a mindset of continual learning, according to McKinsey senior partner Frithjof Lund.

It’s more crucial than ever before that companies choose directors who are ethical and competent. They must possess a deep knowledge in the company’s industry and a commitment to the mission of the company. They should also be able to manage the time commitment that is required, which could include being on committees or serving as an ambassador for the company. They should be able to comprehend the importance of ensuring a healthy balance between work and personal life.

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