The Board of Directors and the Board of Management

A board of directors is a group that governs a business entity whether it is traded on the market (public company) privately held, restricted to family members only (family company) or exempt from taxation on income (a tax-exempt nonprofit corporation). The powers the board has, its duties and responsibilities the board are determined by regulations from the government and the constitution and bylaws for an company.

The majority of presidents and external directors are of the opinion that the board’s job is advisory, not making decisions. Management is the one who runs the business, and the board provides advice and direction to management. Outside directors are hired to be experts in specific areas of business and provide an overview of the business that may not be available to management. Many smart presidents rely on the sources of advice that are represented on their boards – both inside and outside the formal meetings. They take care to choose new directors for their desirable abilities or areas of expertise.

The primary function of a Board is to inquire into management, especially when there are major problems in the company or economy. My research showed that even while many presidents claim that they want directors to ask discerning questions, they do not often allow the questions to be raised at regular board meetings. This is especially true if they feel that they are being criticized by subordinates that attend the meeting.

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