The Board of Directors and the Board of Management

A board of directors is an organization that oversees an organization regardless of whether the entity is publicly traded (public company) privately owned, privately-owned, only accessible to family members (family company), or tax-exempt (a non-profit corporation). The powers, duties, and responsibilities of the board are largely determined by government regulations and the constitution and by-laws of the organization.

The majority of presidents and outside directors agree that the function of a board is advisory rather than of the ability to make decisions. Management oversees the business, and the board acts as a source of advice and counsel to the management. Directors who are outside of the company are chosen for their expertise in certain fields of business and provide a big picture perspective that is not available to the management. Many presidents are aware of the value of the advice given by their boards, both in and outside of formal meetings. They carefully choose new directors based on their desirable abilities and areas of expertise.

The main function of the board is to inquire about the management, especially when there are serious problems with the business or economy. However, my research disclosed that, even though most presidents are known to seek out discerning questions from the directors, they often do not allow them to take place at the regular board meetings. This is especially true when they feel they are under attack by subordinates on the board or in attendance at the meeting.

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