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The Importance of a Well-Rounded Board of Directors

Many quotes remind managers and entrepreneurs that it takes a good team to build a successful company. For public companies the board of directors is the ultimate team that takes on the entire responsibility for the success of a company.

The board is accountable for making crucial strategic decisions, such as merging with a firm, buying or selling shares, and declaring dividends. It also oversees important financial matters, such as making compensation decisions for top executives or approving the annual budget. The board also serves as a bulwark in crisis situations, offering advice to chief executives.

A well-functioning board provides tremendous value to a company by acting as a soundingboard for management, providing impartial feedback, and offering constructive challenges. This is especially important for businesses with a complex business model or that are highly restricted by law (like financial services and healthcare).

Increasingly, boards are expanding their responsibilities to address issues such as organizational culture and talent development. This means they have to be more tech-savvy and spend more time outside of formal meetings. Frithjof is a McKinsey senior consultant, states that they must also promote a culture that is constantly learning.

This is why it’s more important than ever to ensure that companies choose directors who are both competent and ethical. They must have a thorough understanding within the industry of the company and a commitment to the mission of the company. They should also be able manage the time commitments required, which may involve serving on committees as well as acting as an ambassador for the company. They must also be able to understand the importance of maintaining a balance between their work and personal life.

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