The Importance of a Well-Rounded Board of Directors

There are a myriad of sayings that remind entrepreneurs and managers that it takes a team to build a great company. The board of directors are accountable for the success of public businesses.

The board makes critical strategic decisions like merging with other companies as well as acquiring or selling shares, and declaring dividends. It also manages the financials at a high-level such as determining the compensation of top executives and making changes to the annual budget. The board serves as a protector for the chief executive in emergency situations, by providing guidance.

A functioning board adds enormous value to the company by serving as a sonic board for management, providing honest feedback, and presenting constructive challenges. This is particularly relevant for businesses that run complex operations or are heavily restricted (like financial services or healthcare).

As boards expand, they are increasing their responsibilities and are now able to tackle issues like organizational culture and development of talent. This means they need to be more digitally literate and spend more time outside of formal meetings. Frithjof who is a McKinsey senior consultant, says that they should also foster a culture of continuous learning.

Therefore, it’s more important than ever to ensure that companies select directors who are both competent and ethical. They must possess a deep knowledge in the industry they are working in and a commitment to the mission of the company. They must also have the ability to manage their time, which may include participating in committees or serving as an ambassador for the company. They should also understand the importance of a balanced balance between a board member’s personal and professional lives.

Board Directors

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