How to Build a Strong Board of Directors?

Read about the Board of Directors as a functional element of corporate governance and world realities in the article below.

The Definition of Strong Board of Directors

Companies grow and with them the risks of making hasty, emotional decisions. Companies like air need external expertise and an outside perspective. Its fundamental difference between the supervisory board and the board of directors is that having listened to all independent directors, having received external expertise and a critical eye, the owners make decisions themselves. But does this require a Board of Directors? Before creating it, ask yourself at least two questions:

  1. Do you need the protection of your interests as an owner?
  2. Are you willing to share the power to make strategic decisions with independent directors?

Corporate governance or board of directors is a system for managing and controlling companies. Simply put, the shareholder appoints a Board of Directors whose role is to help the company succeed. This includes helping to prepare the company’s strategy, motivation, and appointing a strong CEO. Also includes control of management to ensure that it works in the interests of shareholders. This requires the establishment of various control mechanisms, such as the preparation of high-quality financial reports, an internal control system with clear decision-making powers, and internal auditor functions.

The composition of the strong board of directors team depends on the characteristics of the project, namely its scale, complexity, and so on. The members of the team are project engineer, contract manager, project controller, project accountant, head of logistics department, design manager, production manager (construction, etc.); administrative assistant.

In addition, the strong board of directors participants is: the contractor, or general contractor (the party responsible for the performance of contract work), subcontractor (enters into a contractual relationship with a contractor or subcontractor of a higher level), operational coordinator, designer the person performing the contract research work within the project), the general contractor (the legal entity whose proposal is accepted by the customer, is responsible for performing the work in accordance with the terms of the contract), licensors (organizations that issue licenses for land ownership, bidding, the performance of certain works, etc.), suppliers, authorities, landowner, manufacturer of final products of the project, consumers of products.

The Integral Parts of the Strong Board of Directors

The strong board of directors is considered in theory as a body designed, on the one hand, to control management, and on the other hand, to determine the long-term prospects and development strategy of the company. At the same time, the board of directors performs the functions of an intermediary and representative of the shareholders’ interests before the management. With this in mind, a strong board of directors pays more attention to the formation of the board of directors.

The integral parts of a strong board of directors are:

  • Focus to achieve the goal.
  • Coordinated implementation of related actions.
  • The time frame of the project.
  • Availability of the budget.
  • Uniqueness.

It is always very difficult for board members to raise the issue of a successor, especially if the change is a matter of a relatively distant future. Encourage the board of directors to think about transition candidates as early as possible by explaining that succession planning ahead increases the likelihood of selecting the strongest future. An early start signals the presence of a process, and planned actions compare favorably with a passive reaction of the board of directors to an imminent change in leadership, eliminating the occurrence of stressful and potentially disruptive situations for the business.

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