The structure of a Board of Directors (BOD) or board of trustees is among the most important elements in determining a company or organization’s success. A well-organized board will guarantee that all members are aware of their role and how to do it, and it helps to put the organization or company on the right path to achieve its desired goals.
In essence, the board oversees the executive board of the company or organization and decides the direction for the firm. It is also accountable for appointing and firing a CEO, setting the CEO’s salary, determining compensation for other executives within the company, and taking crucial strategic decisions.
Directors who are independent or external to the company are compensated for their participation. They are non-executive board members that do not hold executive positions within the company. They offer different perspectives to the board, and are often subject-area specialists within the industry that the company operates in.
A two-tiered board consists of the management board, which is comprised of executives from the company and a supervisory board which is composed of directors who are independent. The supervisory board makes sure that the management board functions in conformity with corporate policies as well as laws.
An advisory or consultative board consists of those who have vested interest in the company, such as investors or customers. Advisors can provide information to the top executives of a company and offer perspectives that might not be offered within the company itself. They can also assist with finding potential growth opportunities and help with the implementation of strategies to achieve the company’s goals.