Board of directors

What Is The Board of Directors' Purpose?

The board of directors’ purpose is to come together as a group with the task of overseeing an organization. Ultimately, the boards’ purpose is to make decisions for the company on larger governance issues while also providing cultural, reputational and strategic guidance to the executive team. These decisions are often related to fiduciary matters and it is key that the board best represent the interest of their stakeholders, customers, employees and investors. Depending on the organization structure, a board of directors will also be tasked with hiring and managing executive team members, providing strategy for larger capital projects, managing investment, risk and oversight including cybersecurity. Overall, the board of directors’ purpose is to make sure that the organization is functioning properly and has the resources to continue doing so.

Challenges For a Board of Directors

The challenges for a board of directors can include issues such as profitability, diversity, board structure, forming committees, board effectiveness and communication. Because there is not a set or required number of board members dictated by law for any industry or organizational structure, companies are left up to their own devices for who to include on the board.

For many board of directors, the overall structure of the board will be dictated by the board’s own bylaws. Some boards can have as few as 2 – 3 board members while other boards may have well over 25 members. This same sampling of sizes also appeals to the number of committees on a board of directors. While some boards can function effectively with no committees, others can have several dozen standing committees in a wide variety of functions as required by the board itself.

Board size, intrinsically linked to diversity, is another challenge modern board directors are facing. Boards are facing pressure, for shareholders and from regulations, pushing mandatory diversity quotas. Many companies are now facing governance deficits as a result of maintaining the status quo instead of evolving with the times and the direction of modern governance.

What Makes an Effective Board of Directors?

In order to have an effective board of directors, boards need to have a comprehensive understanding of their corporations’ overall strategy will work better together as boards. The end result is that organizations get better value from their board and management. However, the key to getting to this step is through effective collaboration, communication and integration of technology into all aspects of the board of directors process. Boardroom technology can help expedite boardroom procedures, allow for more secure and streamlined communication and facilitate a closed loop for board administrators, directors, general counsel and corporate secretary to better communicate with the executive staff to ensure the privacy of all board matters and materials. In order to maximize the performance of the board, they must be provided the right environment to become an effective board of directors.