The Board of Directors and the Board of Management

A board of directors is an organization that governs an entity regardless of whether it is publicly traded (public company) privately owned, privately-owned, only open to family members (family company), or tax-exempt (a nonprofit corporation). The powers and responsibilities of the board are determined both by government regulations as well as the constitution and bylaws for an company.

Most presidents and external directors believe that the role of a board is advisory, not a decision-making. Management is the one who runs the business, and the board provides advice and guidance to management. Outside directors are hired for their expertise in specific areas of business, and to provide a perspective on the bigger picture that management may not have. Many presidents are aware of the importance of the suggestions offered by their boards, both inside and outside of formal meetings. They carefully select new directors based on their desirable abilities and areas of expertise.

A fundamental role of a board is to inquire into management, especially when there are major problems with the company or the economy. My research revealed that even although many presidents claim to require directors to ask discerning questions, they do not permit questions to be asked during regular board meetings. This is particularly true if they feel that they are being attacked by subordinates who are present at the meeting.

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