How to form a board of directors

by Melanie Green on Apr 21, 2023

how to form a board of directors

A board of directors is a group of people responsible for overseeing an organisation’s activities. When you want to form a board of directors you should keep in mind that board members serve as trusted advisors (fiduciaries) to the organisations shareholders.

Good boards are high-functioning workgroups whose members challenge and trust one another and engage directly with senior executives on critical issues facing the organisation.

Boards also set the long-term plans or direction of the company. Boards can be found in many organisations, including for-profit businesses, charities, schools, and even nonprofits. Many factors make up a great board. Here is an overview of some commonalities of successful boards.

How many people sit on a board of directors?

The composition of a board can make a difference between a successful board and a less successful one.

The board’s makeup can depend on the size and type of organisation.

However, it should have enough people to manage the organisation but not too many people that it is difficult to foster productive discussions.

For a small organisation, or SME, the board could be three people. For a more prominent firm, the board could be ten people.

It’s also crucial that there is a mix of skills on the board. This includes younger people with fewer years of experience who offer a different perspective and older people with a lot of industry experience.

Choose people with different skillsets to share their knowledge to develop innovative solutions and ideas.

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What kind of people sit on boards?

Diversity is one of the most common factors that make up a great board.

When there is a diverse group of people with varying backgrounds, there will be different perspectives on how to run the organisation.

This can lead to more efficient and effective decision-making, ultimately putting the company in a better position.

One of the most significant benefits of having a diverse board is that they’ll deliver better results because of their different points of view.

The board members will come up with different conclusions, making all the difference in managing an organisation.

What happens during board meetings?

A great board of directors meets regularly to further the organisation’s objectives.

The meeting duration can vary depending on the organisation’s size and goals.

There isn’t a set schedule where they have to meet every month or year.

The important thing is that they are getting things done, whether it’s once a month or once every six months.

When you form a board of directors, you should have a goal for each meeting to ensure that there is a focus on their time together.

Meetings must also be productive, so there isn’t much time wasted on discussions or activities that don’t contribute to those goals.

A good board of directors manages risks. They must minimise company losses and safeguard its assets.

This is done by assessing potential risk factors, like new competitors in the market and mitigating the risks with solutions.

It includes things like developing strategies and adequately executing them.

A great board will have members that know how to manage a business and its growth.

What else does a great board do?

A great board of directors is independent of other influences. It sees things separately from the company to objectively assess opportunities and threats.

This means that wherever the company is, the board should be able to make decisions on the matter without any involvement from other influential people in the executive team.

A great board of directors can help determine a company’s direction by making decisions and leading discussions.

Members of the board should be able to give advice and vote on important matters while ensuring they support the vision set by management.

In addition, board members shouldn’t have conflicts of interest that would hinder their ability to put the organisation’s needs first.

For instance, having a board of directors made up of local competitors would not put the organisation’s needs first.

Competitors may want to put the needs of their own companies first.

Any decisions they make wouldn’t be independent and beneficial to the organisation.

Effective board members should be able to stand on their own regarding what they believe. They shouldn’t immediately give at the first sign of conflict.

The most productive conversations can occur when board members can defend and explain their perspectives and ideas in a way that doesn’t hinder progress.

Members must feel able to express their opinions and contribute.

Does the CEO always sit on the board?

While some level of independence from the company’s leadership is essential, the CEO should still be involved in board meetings.

The CEO and other executive leaders that work within the company environment can have invaluable knowledge about the workplace culture and what’s happening with employees and customers.

The CEO shouldn’t be the only voice at board meetings, but they know that the board will need to access them to make the most informed decisions.

The success of a company can be determined by its board of directors.

Strong boards of directors are diverse, independent, and influential. They steer the company in the right direction and help it grow.

Great boards work for the company’s benefit, not themselves. 

Are you interested in becoming a member of a board? Watch David W Duffy below, explain how the Diploma in Corporate Governance will give you the director training needed to excel in board meetings.

You can also download the course brochure below.

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