The traditional role of the board of directors in a public company – to oversee and control – is hopelessly outdated. So, what should be an effective board of directors? And what are the main characteristics of a productive board?
Board of directors in a new reality
As experts in the field of corporate governance note, today it is no longer enough to be just a “good person” in order to be a good member of the board of directors. Today’s requirements for board members are greater and more complex. This is borne out by the fact that many companies are already demanding that board members not only be loyal but also have certain desired characteristics of a board of directors that enable them to properly discharge their duties on the boards. It can be noted that the increased requirements for members of the board of directors are a clearly defined trend. This is due not only to the requirements of foreign investors but also to the conditions of doing business.
The qualities of a member of the board of directors are determined by the role and functions of the board of directors in the company’s management system. Moreover, it can be noted that the knowledge and skills, personal qualities of a member of the board of directors, should allow him to correctly determine the role of the board of directors and his personal role for this company. This role is different not only for different companies but also for different stages of the activity of one company.
Which aspects are important working with a board of directors?
There are 5 desired characteristics of a board of directors:
- Be more than just an overseer
The world has become more complex and the oversight function is no longer enough. The transition of board members to new roles will open up an opportunity for an open dialogue with top management, not burdened with hierarchical restrictions, and will allow the board of directors to receive more complete information about business and the market. This, in turn, will allow for a more effective business strategy.
- Know your stakeholder
In the classical business model, the main stakeholders have always been at the head of the food chain. But the world has changed and the focus has shifted. The challenge for the board of directors of the new era is to determine who is the key stakeholder and to act in their interests.
- Look “from the inside”
This helps to understand how the company actually works, to assess the quality of the implementation of the business strategy. In a world with huge amounts of information, what you saw and learned yourself is valuable.
- Work under the leadership of the “chairman of a new era”
The leadership qualities and style of leadership of the chairman of the board of directors are essential for the effectiveness of his work. The main task of the chairman in 2021 is to create conditions under which the board of directors and top management can freely exchange information and opinions. With the right chairperson, the council is motivated to share expertise and experience.
- Anticipate events
One of the main tasks of the boards of directors will be to participate in the formation of the company’s long-term business strategy, taking into account existing trends and future market dynamics. At the same time, the strategy should not be rigid, since it requires regular updating in a constantly changing world.