The Board of Directors and the Board of Management

A board of directors is the entity that governs a business entity regardless of whether it is traded on the market (public company) privately owned, closed to family members only (family company) or is exempt from income tax (a tax-exempt nonprofit corporation). The powers and responsibilities of boards are generally defined by regulations from the government and the constitution and bylaws of an organization.

The majority of presidents and external directors are of the opinion that the board’s job is advisory, not a decision maker. Management is in charge of the business, while the board offers advice and counsel to management. Directors who are outside of the company are chosen for their expertise in particular areas of business, and they provide a big picture perspective which may not be accessible to management. Many thoughtful presidents exploit the sources of advice that are represented on their boards — inside and outside the formal meetings — and are cautious in selecting new directors based on their desirable abilities or areas of expertise.

A classic function of a Board is to ask questions of management, especially when there are serious issues with the company or the economy. However, my research revealed that, despite the fact that most presidents claim to want thoughtful questions from directors, they often do not allow them to be addressed at the regular board meetings. This is particularly true if they feel they are under attack by visit this website subordinates who are on the board as well as in attendance at the meeting.

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