What is a Board of Directors? (Overview, Roles, and Responsibilities) (2024)

Organizations such as nonprofits, corporations, and government agencies all utilize boards of directors to provide strategic insight and ensure accountability within the company. Comprising experienced individuals, the board acts as custodians of shareholders’ interests and safeguards long-term success.

Read on to learn more about board of director positions and duties.

A board of directors is an appointed group of individuals with a fiduciary duty to represent the interests of shareholders or stakeholders and oversee a company’s management and operations. The board is responsible for providing the strategic guidance needed to ensure the sustainability and longevity of the organization.

Board members play a critical role in the following areas:

• Risk Management: The board establishes a risk management framework, reviews risk mitigation strategies, and monitors the overall effectiveness of internal controls purpose-built to protect the organization from emerging threats.
• Shareholder Protection: The board acts on behalf of shareholders, safeguarding their interests and maximizing shareholder value. It ensures shareholders receive accurate and timely information, promoting transparency in financial reporting and disclosure.
• Stakeholder Engagement: The board engages with various stakeholders, including employees, customers, and suppliers. It considers their interests and concerns, fosters a positive relationship, and ensures that the organization’s actions align well with the broader interests of the community.

An effective board of directors adheres to a structured hierarchy to ensure effective governance and decision-making on behalf of an organization. The overall composition of the board of directors varies depending on the organization’s size, legal requirements, and industry. Generally, the board of directors is structured as followed:

• Chairperson
• Vice Chairperson
• Chief Executive Officer (CEO)
• Chief Financial Officer (CFO)
• Secretary
• Independent Directors
• Committee Chairs

The division of roles helps the board function effectively, minimizes conflicts, and empowers each individual to make necessary decisions based on their expertise. The typical roles on a board of directors include:

Chairperson

The chairperson of a board of directors serves as the liaison between the board and the company’s executives and leads the board in overseeing the company’s strategic direction. They ensure the board operates efficiently and in the best interest of the organization. Whether a nonprofit or a corporate board, it is typically the board chair who is responsible for scheduling board meetings, setting the agenda, and managing discussions surrounding key items.

Vice Chairperson

Like any vice position, the vice chairperson of a board of directors directly supports the chairperson. If the chairperson cannot perform their duties for whatever reason, the vice chairperson will step into the chairperson’s role by leading meetings and managing the board’s operations. They also collaborate closely with the chairperson to ensure the board operates smoothly and may take on additional leadership roles.

Executive Officer

Focusing more on the daily operations and the actual execution of strategic decisions, the executive officer has a crucial role in a board of directors. They will work closely with the chairperson and vice chairperson to align the board’s vision with the company’s overall mission. It is up to the executive officer to implement processes that streamline productivity for efficient execution.

Chief Financial Officer

The chief financial officer (CFO) is responsible for overseeing an organization’s financial management and reporting. Having extensive knowledge of accounting principles, financial management, and forecasting, the CFO will provide the board with the necessary information to operate efficiently and make strategic decisions. Additionally, the CFO ensures the organization complies with tax and financial regulations.

Secretary

Organizing, maintaining, and recording accurate information during meetings is a crucial aspect of running a board. The secretary is responsible for this task and will use effective meeting management tools to streamline productivity. They will also distribute meeting minutes and other board communications with board members, executives, and other stakeholders.

Independent Directors

It is important to have someone who provides unbiased insight, objective perspectives, and neutral stances when it comes to operating a board of directors. Independent directors’ roles are crucial in maintaining a democratic approach while executing the company’s strategy and enhancing the board’s credibility.

Committee Chairs

Committee chairs play a vital role in ensuring that various departments within an organization function efficiently. They are responsible for setting the agenda for committee meetings, guiding discussions on key issues, and facilitating effective communication between their respective committees and the board.

Committee chairs may be the spokesperson for various groups such as the audit committee, risk committee, compensation committee, and executive committee.

The board of directors holds significant responsibilities in overseeing the management and governance of an organization. These responsibilities might include:

• Hiring and setting compensation for executive leadership
• Adopting policies to address conflicts of interest
• Shaping the organization’s culture and vision
• Improving the organization’s strategic focus and effectiveness
• Ensuring legal and regulatory compliance
• Welcoming new members and removing board members when necessary
• Overseeing financial performance, including budgets, financial statements, and major capital expenditures

Boards rely on board meeting software to streamline board operations and to effectively carry out their duties. Board management software serves as a central hub for board-related communications and gives board directors a secure source of truth for everything they need to be effective in their roles.

With OnBoard, executive boards can simplify meeting management, collaborate securely, access meeting materials in real time, and ensure compliance with governance standards. The software is purpose-built to address real-world needs and reduce complexity so boards and leadership teams can work smarter, move faster, and achieve more for the organizations they govern.

Download our free board meeting agenda template for an example of how OnBoard streamlines board business.