What Role Does a Board of Directors Play in Running a Company?

When it comes to a company’s board of directors, you may find yourself in one of two potential positions. On one hand, you may be in a position where you are appointing or nominating board members to serve on your board. Or, you may yourself be appointed or nominated as a member of a company’s board of directors. In either case, many businesses and board members simply aren’t aware of exactly what a board does and what their duties might include.

Look at the Documents

In large part, the duties and obligations that your board has will depend on what is in your corporate documents—specifically, your corporate bylaws, or management agreement or whatever other documents set the rules for the way that your company will run.

Appointing Officers

One of the biggest rules for any board is the appointment of company officers—positions like President or Vice President or whatever other officers are designated by your corporate documents. Boards of directors often nominate, or vote on, who will be officers of the company. Officers of the company can also serve on the company’s board, if your corporate documents allow that, so long as there is no conflict of interest.

What Duties Does a Board Have?

The board will vote on and approve the larger decisions that are made for your company. These decisions might include things like:

• What markets, products or services the company should engage in, or expand into, or stop offering
• Approval of major contracts, like mergers or acquisitions
• Approval of budgets, which may include salaries, reimbursements and other forms of compensation for company officers
• Deciding how and when dividends are paid to shareholders, or whether company profits will be reinvested into the company
• Making whatever decisions are necessary to maximize the profits for company shareholders and protecting the shareholders’ interests, many of whom will not have much, if any say on the operations of the business

Clarifying Duties and Conflicts

There can be a delicate interplay between a board, which makes major decisions, and higher level corporate officers, like a CEO or CFO, and what powers that they have. Generally, corporate officers have the ability to make decisions on their own without board approval, in the effort to carry out what the board has already decided.

In drafting bylaws, the clearer you are on what duties and obligations that a board has and does not have, the less likely you are to have conflict via a power struggle between officers and the board.

Who Serves?

In private companies, anybody can be a board member, but you can limit who serves or put specific requirements or qualifications in your bylaws. But in publicly traded companies, some board members must be outsiders—that is, people that do not have a direct association with your company.

Note that while employees can be board members, that can create difficult situations should the employee be fired or quit his or her job—firing an employee may not necessarily terminate his or her position as a member of the board.

If you have a board of directors, make sure everything is running the way it should in your company. Reach out to our West Palm Beach business litigation attorneys at Pike & Lustig for support with your case.

Source:

score.org/resource/blog-post/directors-and-officers-understanding-roles-corporate-management