The Board of Directors and the Board of Management

A board of directors is the entity that oversees a business entity whether it is listed on the market (public company) privately held, restricted to family members only (family company) or is exempt from income taxes (a tax-exempt nonprofit corporation). The authority, responsibilities, and duties of the board are heavily governed by the regulations of the government and the constitution as well as by-laws of the organization.

Most presidents and outside directors agree that the role of the board is advisory rather than the ability to make decisions. Management manages the business, while the board acts as an advisor and guidance to management. Outside directors are selected to be experts in specific fields of business and provide an expansive perspective that is not available to management. Many presidents are aware of the importance of the advice given by their boards, both inside and outside of formal meetings. They carefully select new directors based on their desirable abilities and areas of expertise.

The main function of the board is to question the management, especially when there is a serious issue with the business or economy. My research showed that even while many presidents claim that they want directors to ask discerning questions, they don’t allow them to be asked at regular board meetings. This is especially true if they feel they are being targeted by subordinates on the board and in attendance at the meeting.