Board Members Meaning Positions Responsibilities Examples

Board Members Meaning

Board members are professionals on the Board of Directors (BOD) panel that are appointed by shareholders to represent their interests and supervise management. They administer the company by instituting comprehensive strategies and launching planned targets. Moreover, the members usually meet and discuss the firm’s performance at regular intervals.

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They serve as the governing body for an organization. While public companies are lawfully obliged to induct salaried board members roles, the non-obligatory privatized and charitable firms generally have the BOD. Moreover, their legal obligations differ according to states and types of organizations.

What Do the Board Members Do?

Board members form management plans, make decisions regarding key business affairs, safeguard the shareholders’ interests, and govern the enterprise. Moreover, the firm’s regulations decide the number of members, election procedure, meetings frequency, functions, and abilities.

Key Takeaways

Board members are experts incorporated in the BOD by shareholders to represent their best interests and oversee the management.There are two types of members, namely, internal and external board members. The former handles the company’s internal operations while the latter engages with its external audience.Their responsibilities include crisis resolution, counseling and guidance, hiring and evaluating senior management, and establishing company values, mission, and vision.The members hold positions like the chairperson, vice-chairperson, treasurer, secretary, executive director, lead director, and independent director.

Board members roles incorporate the representation of management’s or shareholders’ best interests, and thus, the BOD entails both internal and external members. The former depicts the opinions of employees and internal shareholders. Conversely, the latter manages the interests of clients and target audiences.

To clarify, board members jobs involve:

Designing options policiesGenerating dividend policiesDividend PoliciesDividend policy is the policy that the company adopts for paying out the dividends to the company’s shareholders, which includes the percentage of the amount at which the dividend is to be paid out to the stockholders and how frequent the company pays the dividend amount.read moreOffering discipline valueOrganizing payment for executivesRecruiting and terminating senior officersGuiding mergersMergersMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage firm.read more and acquisitionsSustaining company assetsAssisting managers and their teamsCrisis resolutionEnsuring the company is well-equipped with essential tools

The Board of DirectorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals. read more typically acts as the fiduciary to confirm the security of shareholders’ assets and a good Return on Investment (ROI) through proper management. In addition, they determine regulations during their meetings for complete corporate governanceCorporate GovernanceCorporate governance is a set of rules or practices through which an entity is directed and controlled to increase shareholders wealth by increasing the economic value and is concerned about its relations with various entity stakeholders.read more and oversight. In the US, the annual average board members salary is $1,18,214.

Though committee members oversee the entire company management, some functions preferably have independent committees like compensation or audit committeeAudit CommitteeA company’s audit committee is a group of non-executive directors who are in charge of ensuring the integrity of internal controls, auditing, and financial reporting procedures. It works under the supervision of the Board of Directors and strives to sustain the corporate governance system.read more.

Board Members Positions

Please note that the roles of board members for non-profit or commercial organizations do not follow a fixed structure. Instead, it relies upon the shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company’s total shares.read more, the corporation, and the niche.

Here are the BOD’s top members:

Chairman

Also labeled as “chair,” “chairperson,” or “president,” it portrays the leader of an enterprise who predetermines the vision of the BOD. They preside over board meetings to ensure its orderly and seamless functioning. Often, the Chief Executive Officer (CEO) acts as a chairman.

Vice-Chairman

Alternatively called “vice president,” this role is immediately junior to the chairman and hence, is served in its absence. It assists the chairperson and is also considered a chairman’s successor, thus termed as “chairman-elect.”

Treasurer

The designation portrays the in charge of treasury as responsible for the care, receipt, and distribution of finances. They observe the overall financial management of a company along with sales, fundraising, funding, commercial reporting, and monetary budgeting and planning.

Secretary

A secretary is an official administering the correspondence, records, and all the associated affairs of a corporation. They are recruited to perform authorized tasks like typing letters, arranging meetings, and making important phone calls to clients or shareholders.

Also, the BOD comprises an executive director, lead director, independent director, de facto director, celebrity director, and nominee director.

Examples

Here lie a few examples to comprehend the concept.

Example#1

Say that a mega corporation’s shareholders appoint board members as:

Izzy as ChairpersonJack as Vice-chairpersonKatherine as TreasurerNash as Secretary

And the list goes on with crucial designations like executive directors, lead directors, and so on. So now, let’s explain the relevant duties of the top 4 BOD positions.

Izzy is the head of the company who sets its vision and ensures that everyone functions appropriately to serve the same. Being the vice-chair, Jack assists Izzy and manages everything in her absence. If she abruptly resigns, or the BOD terminates her, Jack is supposed to act as the interim or (if required) permanent president.

Katherine is answerable for every penny coming in and going out of the organization. In addition, she plans financial policies, assures their compliance, and optimizes the firm’s monetary assetsMonetary AssetsMonetary assets are short-term assets that can be easily and quickly liquidated, such as cash and cash equivalents, short-term investments, and receivables. They have a fixed monetary value.read more for assured success. Lastly, Nash conducts the official functions like typing letters, arranging meetings and phone calls, and sustaining relevant corporate reports.

Example#2

Shortly a day after Elon Musk disclosed the latest $3 billion position in Twitter as its largest shareholder (9.2% of company shares), the company decided to put him on its board. Its CEO Parag Agrawal shared the news on Twitter.

Musk’s directorial term will last till 2024 and, as per the new agreement, he can only obtain up to 14.9% of the firm. Furthermore, Musk has earlier expressed his desire for Twitter to employ better free-speech laws, decrease moderation practices, and become more decentralized.

Board Members Responsibilities

Lastly, here are some pivotal duties that come with board members jobs:

Guidance And Suggestions

The members mainly act as counselors and consultants to the firm’s management. Moreover, they are certainly knowledgeable enough to offer beneficial guidance within the deadline after conducting a brief and mild examination. Occasionally, their advice can cause a review or alteration of the management’s decision.

Crisis Management

In case of the president’s sudden demise or disability, BOD is accountable for the heir selection procedure. Additionally, the job profile of board members for non-profit and profit organizations may include asking an inept or unethical president to resign and determining the successor. This assures the effortless functioning of the business.

Formulate Company Purpose, Values, And Vision

The members confirm that its values, vision, and mission align with its management activities. They design the mission statement and ensure that everyone connected with the company (indirectly or directly) is aware and works for the same.

That is to say, the BOD ensures that the employee and audience actions match company values to attain wealth maximizationWealth MaximizationWealth maximization means the maximization of the shareholder’s wealth as a result of an increase in share price thereby increasing the market capitalization of the company. The share price increase is a direct function of how competitive the company is, its positioning, growth strategy, and how it generates profits.read more.

Recruit And Assess the Senior Management

Board officials recognize, hire, and evaluate executive management designations. They inspect their strengths, weaknesses, and requirements to appoint the best possible chief executives with the desired skill set. Additionally, they assess their performance to ensure that their choice is on-point.