Board Structure
The board should constitute an integrated team to shape the destiny of the company, ensure its profitable performance and safeguard its interests. Effective boards have a good balance of competent directors. The board of directors require the professionalism, competence and effectiveness of group of people. They are making key decisions about where the organization is heading, how it will get there and what risks it should take.
The board of directors appoints the chief executive officer of the corporation and sets out the overall strategic direction. In corporations with dispersed ownership, the identification and nomination of directors are often done by the board itself, leading to a high degree of self-perpetuation. In a non-stock corporation with no general voting membership, the board is the supreme governing body of the institution. Its members are sometimes chosen by the board itself.
executive director:
An executive director is a member of the board of a firm or non-profit, who also has management responsibilities. The executive director is appointed by the board of directors and works with the board to develop the strategic plan for the organization. As leaders, executive directors must create the culture of their organizations. They are the foundation of motivating employees and volunteers. They oversee the entire budget, marketing efforts, and encourage a positive company culture. Executive directors grow organizations with great planning. An executive director of a nonprofit must have a true passion for the mission that translates into getting operational needs met with in its available resources.
non executive director:
A non-executive director is a board member without responsibilities for daily management or operations of the company or organisation. It is the non-executive directors who provide the variable element in achieving a well-balanced and competent board. they are chosen with regard to the skills, experience and approach. A non-executive director should provide an independent and impartial view of the board’s considerations and decisions while identifying the company’s affairs..
independent director:
An independent director is a member of a board of directors who does not have a material, pecuniary relationship with company or related persons, except sitting fees. Independent director must not be an officer, employee of the company or not related to its subsidiaries. That would interfere with the exercise of independent judgment in carrying out the responsibilities of an independent director.
He should have personal qualities of courage, integrity, common sense, good judgement, tenacity, diplomacy and an ability to listen carefully and to communicate with clarity, objectivity and brevity. A sharp business mind with an ability to focus on the matters in hand is essential.
Nominee director
Nominee director is an individual who is appointed by a shareholder, creditor or interest group. They are appointed through either contractually or by resolution at a company meeting. They has a continuing loyalty to the appointor or the appointing company.
Women director:
In a civilized world women should be part of the higher level of decision making process in an organization. Several countries it is mandatory to appoint at least one woman director as a board member. It is applicable to public companies and private concerns.
Women director has to play the role like any other director. Women can also take up a role of Nominee Director who will be nominated by a party in the company to take care of its interest. Also, Women can take up a role of Independent Director. A woman director can hold the position of Director until her next Annual General Meeting from the date of appointment. She is also entitled to seek for reappointment at the general meeting.
chairman/chairperson:
The chairman of the board leads the board and makes final decisions. Chairmens are leaders. They provide active leadership to the board and to the organization. But remember that he is the chairman of the board not chairman of the company. A chairman ensures that the board can work as a cohesive team that is devoted to the continuing success of the enterprise. Chairman should exercise superior skills to ensure that the board is effective. They should successfully manage the business of the board and identify the alliances that deliver the strategy. He should have skill to guide the board to focus on the relevant issues and draw out the best from each director. it is the chairman’s responsibility to ensure that the board delivers high level of effectiveness.
It is important to say that these different types of directors have same legal duties, responsibilities and liabilities. All types of the members have a fiduciary duty to the company and must act in the best interests of the company.
Length of service:
If company wish a regular change in the board composition, length of service of directors can be set up to a limited years. This will enable entry of new director in to the board and help to get new perspective to the business. Directors who retire from active duty should expect to resign from their post on the board.
Board size:
the determining factor on the board’s size should be the need for well informed decision making. Since this is the primary consideration, an effective board should have around ten directors including chairman. The size can vary from six to maximum twelve members. Boards become relatively difficult for the chairman to lead as the numbers increase above ten directors. The Individual directors will get an opportunity to make an impact on the decision making in a smaller board. It will enable open discussion and exploration. Indeed, the complexity and scope of topics that most boards face, require that there be more than six directors for adequate effectiveness. Hence a size of ten directors in a board is optimum. A board with size of ten will give a spread of knowledge, experience, perception and acumen to adequately inform the range of issues face by a board of even a complex organization. These medium sized boards will make a well informed group of responsible professionals, who make all important insights and decisions at the head of a company or an organization.
Fiduciary responsibility: All the directors should fully understand their fiduciary duties to the company. They should consistently comply with laws and regulations and behave with integrity and honesty. Its decisions are answerable even after a long time. The board should ensure that the company complies with relevant laws, regulations and codes of practices.
