Board structure in a nutshell
A board of directors is a group of individuals elected by the shareholders of a company to oversee its management and make strategic decisions on its behalf.
The board includes executive and independent directors, led by a chair. The board is responsible for setting the overall direction of the company, making important decisions such as:
- approving major investments and acquisitions,
- hiring and evaluating the performance of the company's senior management team,
- ensuring the company's compliance with legal and regulatory requirements, and
- protecting the interests of the shareholders.
A board of directors may have several committees to help manage specific areas of the company's operations and compliance. These committees are typically made up of a smaller group of board members, and are chaired by one or more board members. Some common types of board committees include:
- Audit Committee: responsible for overseeing the company's financial reporting and internal controls.
- Compensation Committee: responsible for determining and approving executive compensation packages.
- Nominating and Corporate Governance Committee: responsible for identifying and recruiting new board members, and for developing and maintaining the company's corporate governance guidelines.
- Risk Committee: responsible for identifying, assessing and managing the various risks faced by the company.
Committees generally have a charter, outlining their responsibilities, composition and reporting structure. They typically meet regularly and report back to the full board on their activities and recommendations.
It's worth noting that not all companies have committees, but larger companies tend to have more committees to support the board's function and decision making. The internal structure and committees will vary depending on the size and nature of the company.
Role of executive officers on the board of directors
Executive officers are members of a company's senior management team, and they often serve as directors on the company's board of directors. As directors, they play a key role in the strategic decision-making and oversight of the company's operations. They are typically responsible for the day-to-day management of the company and report to the board on the company's performance and any important issues that arise.
Executive officers also have a unique perspective on the company's operations and can provide valuable insights and expertise to the board. They may also serve as a liaison between the board and the management team, helping to ensure that the board's decisions are effectively implemented.
However, it's worth noting that independent directors are usually considered more important for the board to maintain a balance of power and to avoid conflicts of interest. They are not beholden to the company's management and are expected to bring an independent perspective to the board's decision-making.
Whether the board is small and has no committees, or is comprised of independent and management members, the structure of the board is designed to oversee senior management and the company on behalf of shareholders.
These charts are made with Lexchart for automatic organization charts.