The Board of Directors and the Board of Management

A board of directors is the group which oversees a company regardless of whether it’s listed on the market (public company) or privately held, restricted to family members only (family company) or is exempt from taxes on income (a tax-exempt nonprofit corporation). The powers and duties of boards are generally defined by regulations from the government and the constitution and bylaws for an company.

Most presidents and outside directors agree that the function of a board is advisory rather than of a decision-making nature; management oversees the business, and the board acts as an advisor and guidance to management. Outside directors are chosen for their expertise in particular areas of business, and also offer a perspective on the big picture that management might not have. Many smart presidents take advantage of the sources of advice represented on their boards — inside and outside the formal meetings. They take care to choose new directors for their desirable qualities or areas of expertise.

The main function of the board is to question the management, particularly when there is a serious issue with the economy or business. However, my research revealed that, despite the fact that many presidents profess to want thoughtful questions from directors, they often do not permit them to be discussed at the regular board meetings. This is especially true when they feel that they are being criticized by subordinates of the board who are present at the meeting.

Shopping Cart