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 2013. 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: A company’s board is responsible for managing the operations and management of the company in a legally compliant manner to achieve the company’s objectives and to enhance and protect the interests of its shareholders, employees and all stakeholders. In case of non-compliance, a director can be held personally liable as being the ‘officer-in-default’.
- The Companies Act provides for specific duties for directors, including the duty to act in good faith, to exercise due and reasonable care, skill and diligence, to avoid conflicts between the company’s interests and their personal interests, and not to achieve any undue gain or benefit.