The Importance of a Strong Board of Directors

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A board of directors is legally responsible for making high-level decisions, such as the hiring and firing of the chief executive officer, directing the strategic direction of the business, and ensuring that the company’s objectives are met. The board is comprised of respected and knowledgeable individuals and former executives chosen from the community. They are accountable for establishing corporate governance.

A well-functioning board has a clear mission and is able to operate with open communication with respect for differing views and accountability to shareholders and other stakeholders. It also includes independent board members who are free from conflicts of interest and who have an overall view of the company’s future. An official orientation process, establishing relationships with other members, and agreeing to meet promptly are crucial.

A good board member is not just knowledgeable about business, but also curious. They can ask insightful questions to the management and to other members which will challenge their thinking and help them make the right decisions. Being a specialist, such as sales or capital-raising expertise is also an asset.

Boards are increasingly taking on additional responsibilities such as strategic planning and management of resilience and risk. They also have to tackle issues related to diversity and inclusion, as well as digitalization and technology. They need to be more technologically proficient, and play a larger role in the selection of CEOs and other top leaders. The COVID-19 pandemic has taught boards to be more proactive in addressing crises and preparing for uncertainty according to McKinsey.