About Board of Directors of a firm

Board of Directors are the individuals elected by the shareholders of the company who oversee the activities of a company. Board of Directors are some times referred to as board of trustees, board of governors, executive board or simply ‘the board’.

The board of directors is made up of two kinds of representatives. One: Internal individuals within the company. These can be CEOs, CFOs etc who work for the company. The other kind is external individuals who are independent from the company.

The responsibilities of board of directors include

Governing the organization by establishing broad policies and objectives
Accounting to the stakeholders for the organization’s performance.
Selecting, appointing, supporting and reviewing the performance of the CEO and other high level management team
Formulating company’s business strategy
Approving annual budgets

Board of Directors can be divided into three different categories

Chairman: The chairman is the highest of an organization elected by board of directors. Whatever responsibilities mentioned above, chairman will be more accounting for them compared to any other board members.

Inside Directors: Inside directors are either shareholders or high-level management within the company like CEO, CFO etc. Inside directors are responsible for implementening business strategy and monitoring day to day operations of the company

Outside directors: Outside directors are external individuals chosen and independent of the company. There are many reasons for this. They may be most experienced professionals in the same sector of that company and so they help for the growth of the company.