A board of directors oversees the activities of a business entity (private or public company, non profit organization or cooperative business trust, family-held entity) and decides how the entity will be run. Members of the board may be appointed by shareholders or elected (bylaws, articles of incorporation). They are compensated via salary or stock options. Fiduciary duties or shareholder violations can remove them from their positions, for example, selling board seats to outside interest groups and attempting to influence the vote to benefit their businesses.

Effective boards balance the concerns of stakeholders and the management’s vision. They comprise members from both inside and outside the company. The members are usually chosen for their expertise and experience in the field, and ensuring they have the required skill sets to effectively guide the business. They must be able to identify and assess risks, devise strategies to mitigate them and oversee the performance of management.

When choosing new members to join your board of directors, think about their commitment to time as well as any other responsibilities they may have beyond work. It is also important to be aware of their availability and if they are in a conflict of interest. Meeting minutes that are well-documented will help ensure that board members know their roles and responsibilities. This will also guarantee accountability for any decision made. Lastly, it’s important to create a list of potential candidates early on and make sure to inform people about board positions. This allows you to find qualified candidates before their term is over, avoiding lag in strategy.

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