The Importance of a Well-Rounded Board of Directors

Many sayings remind managers and entrepreneurs that it takes a good team to create a successful company. The board of directors is responsible for the success of public companies.

The board is responsible for making important strategic choices, for example, merging with a different firm, buying or selling shares, and distributing dividends. It also handles the finance at a high level, like the setting of compensation for top executives or approving the annual budget. The board also serves as a shield in crisis situations, providing direction to chief executives.

A well-functioning board can add tremendous value by acting as a summing board for management by providing objective feedback and providing constructive criticism. This is particularly crucial for businesses that run complex operations or are heavily controlled (like healthcare or financial services).

Boards are increasing their responsibilities, and are now tackling matters like organizational culture and management of talent. This means that they have to be more tech-savvy and spend more time outside of formal meetings. This also means they must promote a culture of continuous learning, says McKinsey senior partner Frithjof Lund.

As a result, it’s more important than ever that companies select directors who are both competent and ethical. They should be experts in the business’s field and committed to the company’s mission. They must also be able to manage the time commitments required, which could involve participating in committees and acting as an ambassador for the company. They must also be aware of the importance of ensuring a healthy balance between the work of a board and personal life.

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