A board of directors manages a corporation or an organization's activities. A board of a for-profit corporation can be well compensated. The board of a nonprofit may be responsible for raising funds and making personal donations. A company or nonprofit's bylaws determine the board’s roles and responsibilities. State laws regulate and monitor a board’s actions. The names board of governors, board of regents, board of trustees or board of executives can be used alternatively to mean board of directors.
For-Profit Corporate Boards
A corporation's shareholders elect its board of directors. The shareholders have regular elections, usually annually. They elect the board of directors to manage the company's profit-making for the following year. Either the shareholders or the board members also elect a chairman of the board of directors. Depending on the corporation's size, this person may also be the chief executive officer. In for-profit companies, the board is responsible for steering the company toward the year’s profit goals, overseeing all levels of operation within the company, and finalizing all decisions made to keep the company moving toward its financial goals.
The members of professional organizations elect their board of directors. In these cases, the board of directors is directly responsible to the membership. Any decisions the board makes may have to be ratified by a unanimous vote of the full membership. For instance, if the board of directors of a professional group of lawyers chooses to endorse a specific law or political candidate, the endorsement will not be complete without approval of the voting membership. This is different from a corporation board where the employees and shareholders follow the board of directors' lead.
A member of a board of directors for a nonprofit is generally chosen to bring fundraising or professional ability to a board. For instance, since all nonprofits must file regular tax statements to maintain their status, one member of the board of directors will usually be someone with the professional qualifications to file those federal, state and local forms to keep the organization in step with regulations. The board also includes members who specialize in accounting, fundraising and public relations. In established and better funded nonprofits, the board may be chosen to draw financial donations to the organization.
Professional organizations, municipalities, universities or nonprofit organizations may have advisory boards. Serving on an advisory board is largely an honorary position. Retired members from previous boards who have a dedication to a cause, a town, village or a professional organization will remain attached to their professional life through a position on an advisory board. Advisory boards offer experience to a general board of directors in times of change or crisis. Advisory boards do not generally meet as frequently as operating boards, are not required to raise funds, and may have “curb appeal,” meaning their names lend the organization credibility.
- "Economics for Dummies"; Sean Masaki Flynn; 2011
- Free Management Library: All About Boards of Directors
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