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What is a board

A board is a group of people who lead and manage a company, organization, or similar.

A board is a group of people who lead and manage a company, organization, or similar.

What does the board do?

The board functions as the top management of a company and is responsible for, for example, creating strategies and organizing the business, creating budgets and guidelines, hiring a CEO and/or overseeing what happens in the company. This includes having control over both accounting and asset management.

The tasks of a board are determined by the Corporations Act 2001. There is a lot of room for interpretation in the tasks and responsibilities of a board, and there is also a lot of variation in what a company needs. For example, smaller companies do not have the same needs as large corporations.

A board should have regular meetings to follow up on what is happening in the company and make necessary decisions. The board often asks the CEO or other responsible persons in the company to prepare matters for the board meetings with information that the board must consider and make decisions based on. The CEO should update the board on the company’s development every four months, either in a meeting or in writing.

The main responsibilities of the board

  • Representing shareholders: The board represents the interests of shareholders and appoints directors to act on their behalf. Directors owe a fiduciary duty to the company and must act in the best interests of the shareholders.
  • Setting direction and Monitoring: In larger organisations, the board has a more “hands-off” role, focusing on direction-setting and monitoring the organisation’s performance. The board is responsible for governing the organisation, not managing its day-to-day operations.
  • Compliance with legal requirements: The Corporations Act 2001 (Cth) specifies criteria for board composition, such as the requirement for at least one director to ordinarily reside in Australia for private companies and at least three directors, two of whom must ordinarily reside in Australia, for public companies. The ASX Listing Rules also require publicly listed companies to prepare an annual corporate governance report.
  • Evaluation of board performance: The ASX Corporate Governance Council provides guidelines for the number of members on Australian boards, and the board should be of sufficient size to meet the requirements of the business without being unwieldy. The Australian Securities and Investments Commission (ASIC) regulates Australia’s board of directors, enforcing and regulating laws that protect consumers, investors, and creditors.
  • Promoting diversity: Australia’s boards of directors tend to be more homogenous, with members having similar education, professional backgrounds, gender, age, and ethnicity. However, the ASX is making strides to promote diversity on Australian boards of directors, encouraging public companies to reveal their efforts to increase female representation on boards.