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Incredible role of board of directors in a company

The role of a board of directors

Not to mention, the top officers of a company drive the firm in the right direction. They can be:-

  • Chief executive officer (CEO)
  • President
  • Chief finance officer (CFO)
  • Chief operating officer (COO). 

In short, their decisions affect the company growth and success. Hence, the senior managers should follow the right path for the conduct of business.

To ensure it, the board of directors plays a key role. They are a group of members to track and control all the activities in a company.

In brief, they act as a safeguard of the company and protect the company’s funds and assets.

Besides, they lead the team to work for the best of the company.

The board of directors

How to form a Board of Directors?

To form a board seeks special attention and time. Regardless, companies form the board to set the right goal and take it to the forward.

A company can appoint a number of directors as per the local industrial rules. For e.g. A small company can appoint a maximum of seven directors.

This role demands expert knowledge of global business standards to use in business for high growth.

Yet, an investor can become a member of the board and use his skill and background for the growth of a company.

By and large, the nomination committee suggests the candidate, and the shareholder selects the best candidate out of them by cast their vote. 

 
How to form a board of directors
 

Types of committee members

A committee member is a director to carry out the specific function. They handle roles such as governance, research, finance, etc. to give results from their inputs.

Committee members play a key role to find the best strategies for the growth of a company.

They place their ideas in the board meetings held by the chairman (the head of all committees) to take it to the fulfilment stage.

All in all, the 4 main committees in the company are:-

  1. Audit Committee
  2. Compensation committee
  3. Nomination committee
  4. Corporate governance committee
1. Audit committee:

The aim of an audit is to examine the company practices by checking its company records, books, and inventory. 

A successful audit confirms the company is following the right practices for the conduct of businesses.

The auditor’s prime duty is to check the recorded data and find the gaps to avoid any fraud that may take place.

The audit committee of a company needs skill in their field to connect well with both internal and external audit firms to take the steps to fill the reported gaps.

audit committee

2. Compensation committee:

We all know that a company can only run and grow by skilful employees. For that reason, the top positions should fill by research and fix the best pay and perks.

In brief, the compensation committee finds the talent from the market.

3. Nomination committee:

The nomination committee finds the right candidate to elect for the position of directors in a company.

They define the assessment criteria for the selection of a candidate such as

  • Background
  • Experience
  • Academic degree of a candidate.

The chairman, CEO, deputy chairman of the board are nominated by this committee. Yet, they are chosen by the stakeholders through the voting system 

4. Corporate governance committee:

They play a major role to strengthen the culture of a company because they define the practices, policies and laws in order to operate, regulate and control the business.

These policies and laws are essential to maintain the integrity of the employees to follow the right practices. 

 
Corporate governance committee
 

List of Directors in Amazon

Most of us know about Amazon company but their directors maybe not known to us. Thus, a list of directors is mentioned in this example. 

  1. Jeffrey P Bezos                  – Chairman, President and CEO
  2. Keith Brion Alexander       – Director
  3. Patricia Q.Stonesifer           – Independent Director
  4. Jonathan Cake Rubinstein   – Lead Independent Director
  5. Indra Krishnamurthy Nooyi – Independent Director.

These are the team who are responsible for the success of a company like Jeff Bezos.

The duty of shareholder

A shareholder has a share capital in a company and enjoys the profits of the company in the form of dividends. Yet, they are not liable for the debts of the company.

In the first place, investors should keep the company’s growth first by leaving their self-interest. They should look over the management’s decision whether to distribute the profits in form of dividends or to invest in the expansion projects is in favour of the growth of the company or not.

A shareholder’s main duty is to track the company performance and ensure that it is run by qualified board members.

For e.g. – A shareholder can check the committee member strengths to handle the role and their knowledge of global business standards to use in business for high growth

In addition, a shareholder can raise their issues and concerns need for the growth of a company.

In fact, an annual general meeting is the best platform to see the potency of the board of directors and approve the strategies to take place.

If the shareholder is not able to attend the general meetings, they can appoint a proxy in their place.

In case, a shareholder catches the wrong doing by a director, they can act legally to save the company.

 It is the duty of a shareholder to check the board members are independent and don’t have a direct relationship with the company. 

It is important to note that a director doesn’t receive any sort of compensation other than the director’s fees.

A board of directors’ decision should watch by shareholders because the right decision can take the company to success.

A shareholder always keeps in mind that a growing and successful company can give the returns on their hard-earned invested money in the company

Summary

  • The board of directors plays a major role to track senior management activities.
  • The committee is formed to carry out the specific functions of a company.
  • The shareholders choose the board of directors by the voting system.
  • Shareholders play a main role to check the company’s performance and the potency of the board members.
  • General meetings are the best platform to raise the concern and give approval for the strategies.
  • A shareholder has a right to act against the director who is following the wrong practises in a company.
  • A bad decision by management can lead to the fall of company and its stock price

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