The Board of Directors and the Board of Management

A board of directors is a body that oversees an organization regardless of whether the entity is publicly traded (public company) privately owned, privately owned, only open to family members (family company), or tax-exempt (a nonprofit corporation). The powers the board has, its duties and responsibilities the board are mostly determined by regulations from the government and the constitution and bylaws for an organization.

Most presidents and directors believe that the role of a board is advisory, not a decision maker. Management is in charge of the business, and the board provides advice and guidance to management. Directors who are outsiders are hired because of their expertise in particular areas of business, and also to provide a perspective on the big picture that management may not have. Many presidents are aware of the importance of the advice provided by their boards, both inside and outside of formal meetings. They carefully select new directors according to their desired qualities and areas of expertise.

The role of the board is to question the management, especially when there are major issues with the business or economy. My research has revealed that while many presidents claim that they expect directors to ask discerning questions, they don’t always allow them to be asked during regular board meetings. This is especially true if they believe they are being attacked by subordinates who attend the meeting.

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