The Importance of a Well-Rounded Board of Directors

Many quotes remind entrepreneurs and managers that it takes a good team to build a successful company. The board of directors are accountable for the success of public businesses.

The board makes crucial strategic decisions like merging with other firms and acquiring or selling shares, and distributing dividends. It also manages high-level financial matters like determining the compensation for top executives, and adopting or amending the annual budget. The board acts as a protection for the chief executive in crisis situations, providing advice.

A well-functioning board adds tremendous value to a company by serving as a sounding board for management, giving an objective view of the situation, and providing constructive challenges. This is particularly important in companies that have a complex business model or are highly controlled by law (like financial services and healthcare).

In a growing number of cases, boards are expanding their responsibilities to address issues like organizational culture and development of talent. This means they need to be more tech-savvy and spend more time working outside of formal meetings. Frithjof who is a McKinsey senior consultant, explains that they must promote a culture that is constantly learning.

It is therefore more important than ever before for companies to choose directors who are both competent and ethical. They must possess a deep knowledge in the industry they are working in and a commitment to the company’s mission. They must also possess the ability to manage their time, which may include working on committees or acting as an ambassador for a company. They should also understand the importance of maintaining a healthy balance in a board member’s personal and professional lives.