A board of directors oversees and provides advice to an organization, operates independent from company management and makes decisions that help the firm thrive. It ensures the entity is legal and in the best interests of investors, employees and other stakeholders. Board members should have a wide range of capabilities and experience, and work to create a culture that is open and trusting.

The size, composition and structure of a board will differ depending on the nature of the entity. This includes whether it is publicly traded (as an open company), privately held (private or limited) or owned by employees or family members (family-owned). The board’s governance is controlled by its own set of rules, which could be set out in its articles of incorporation or other bylaws.

The board’s primary responsibility is to meet three essential obligations:

A well-rounded board is comprised of members with diverse backgrounds and experiences. They are generalists, able to provide a helicopter’s perspective and yet are experts in their specific areas of expertise. They are prepared to ask tough questions and challenge management’s beliefs. The best boards also encourage diversity and encourage collaboration as well as communication and trust.

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