Corporate Board of Directors’ Functions and Responsibilities Research Paper

A corporate board of directors is traditionally organized to represent the interests of shareholders as the main stakeholders within the definite company. From this point, the functions and responsibilities of corporate directors depend on the necessity to regulate the development of the company with references to the interests of all the stakeholders with the main focus on shareholders and employees.

Thus, the major functions and responsibilities of the board of directors are to select and appoint principal senior executives, supervise the work of the management team, oversee and control the particular features of the corporation’s business, develop the capital structure, financial objectives and perspectives for the company, and to make decisions about the changes in strategies and practices of the firm.

It is necessary to concentrate on the fact that the effective activities of the corporate board of directors can influence the progress of the company and its performance within the industry significantly. Moreover, there are clear connections between the directors’ functions and responsibilities and the firm performance with references to the control of the managers’ work within the company (Bateman and Snell).

However, it is important to distinguish between the board’s responsibilities and the functions of managers because one of the main responsibilities of directors is to control the effectiveness of the managers’ work about the policies and decisions developed by the board during the regular meetings. The corporate directors do not work as managers, but they supervise the managers’ activities to contribute to the company’s development.

Thus, the above-mentioned functions and responsibilities can be discussed as covering only the main spheres of the board of directors’ influence within the company. From this point, it is necessary to pay attention to the variety of functions which can be performed by directors to meet the interests of shareholders and employees and contribute to the organization’s development within the industry.

Cross and Miller state that “the board of directors is the ultimate authority in every corporation. Directors have responsibility for all policymaking decisions necessary to the management of all corporate affairs” (Cross and Miller 430). The orientation to the shareholders is the characteristic feature of the board’s activities because the board of directors is often organized to represent the interests of investors and shareholders within the firm.

The board of directors can consist of several members, and the number of directors can depend on the firm and its size. Although the number of directors functioning in the corporation can be different, “directors must act as a body in carrying out routine corporate business” (Cross and Miller 430).

It is important to note that directors are usually elected by shareholders, and these persons can be the representatives of the upper management within the organization or independent persons who are not employed within the company (Bateman and Snell). Thus, the main task of these members is to combine their efforts to regulate the development of the definite corporation effectively.

It is stated that the members of the board can be ‘independent’ or not to represent the company as the employee. The role of independent persons as directors of the board is significant because they can regulate the business of the company without references to personal interests.

‘Independent’ directors regulate and oversee the process of completing the business goals according to the interests of share owners. Moreover, ‘independent’ directors can focus on the international relations of the company because they often have the experience of the work in international and multicultural companies associated with the definite firm or industry in which the firm operates (Ong and Lee).

It is also important to state that the terms for performing the functions of a member of the board can be different and vary from a year to several years, depending on the interests of shareholders electing directors.

From this point, many ‘independent’ corporate directors can operate within the other sphere, but their experience and knowledge are important to represent the interests within a certain company.

That is why corporate directors also work to maximize the shareholders’ profits and contribute to the company’s progress within the market (Ong and Lee). Furthermore, the main responsibility of the corporate directors is to meet the interests of stakeholders from the point of their compensation and work conditions.

Orienting to the interests of shareholders, the board of directors works to guarantee the effective protection of the share owners’ assets and returns. Nevertheless, it is necessary to pay attention to the fact that the activities of the board directors cannot be influenced directly by shareholders.

According to Cross and Miller, “although directors occupy positions of trust and control over the corporation, they are not trustees because they do not hold title to the property for the use and benefit of others” (Cross and Miller 430). However, shareholders are ready to invest in the company when they can trust corporate directors based on their experience and status within the industry.

Thus, making efforts to create the necessary conditions for the company’s development and improvement of the employees’ performance, corporate directors do not function as managers within the organization. The corporate directors’ function is to select and appoint effective executive officers to guarantee the progress of the business with references to all the spheres, including the management issues.

Thus, the board of directors is the governing authority, but not the department which works with the issues of management. According to Cross and Miller, “directors are also expected to exercise a reasonable amount of supervision when they delegate work to corporate officers and employees” (Cross and Miller 433).

In spite of the fact corporate directors are responsible for supervising the activities of officers, this function cannot be discussed within the traditional management. Moreover, it is important to refer to the main responsibility of the board which is associated with the question of human resources. As it was stated earlier, it is the duty to appoint the company’s chief executive officer who should be appropriate according to the firm’s standards and values.

It is important to pay attention to the fact that in spite of the visions that the role of the board of directors within the company is rather passive, the real situation is quite the opposite because corporate directors influence the development of the corporation’s business and regulate all the financial questions (Bateman and Snell).

Thus, the next important responsibility of the board is the focus on setting the financial objectives and developing the financial programs which are necessary to determine the capital structure within the definite company, the concentration on the possible dividends, stock pills, and share investments which are associated with the firm’s business and progress.

As a result, to regulate the financial questions, the board of directors is responsible for controlling the financial statements and development of the major plans to implement different financial programs within the corporation. Thus, the corporate directors work as a body when they discuss and implement effective financial programs and decide on the time of declaring dividends which should be paid to share owners (Cross and Miller).

The decision making and policy making processes can differ depending on the number of corporate directors in this or that firm. Nevertheless, “each director has one vote, and customarily the majority rules” (Cross and Miller 430). From this point, the decisions are made with references to the majority.

The corporate board of directors is responsible for making decisions on the issues of developing new product lines or changing strategies. Moreover, the decision-making process is often associated with negotiations conducted by the corporate directors to make decisions about the most urgent questions which can influence business development.

Although the corporate board of directors can be discussed as the part of the management team within the definite company, the decisions on the effectiveness of management and business development are made with references to the reports of the audit and credit committees.

To supervise the situation in the company, it is necessary to conduct regular meetings and discuss the main issues. Nevertheless, annual meetings to conclude about the company’s success are the most significant meetings for the corporate directors because they make conclusions not only about the activities of the chief executive officer (CEO), managers, and employees but also about their performance (Cross and Miller).

It is important to note that the effectiveness of the CEO’s work and the managers’ performance depends on the approaches used by directors to develop paths for the company’s development and supervise the managers’ activities. The corporate directors also should perform a range of the other duties and functions along with the basic responsibilities.

Therefore, the board members are responsible for participating in the monthly and annual meeting and discussions, for supervising the business development with the help of reviewing the financial reports, for approving the annual budget depending on the business plan and discussions, for regulating the activities of the CEO and the company’s mangers basing on their reports, for controlling the company’s funds, for proposing and working out the amendments to the business plan, and for determining the compensation for the CEO (Cross and Miller).

The role of the board of directors is important because the members of the board work as a body to regulate the functions of the whole company about the main business questions. From these perspectives, the board members act according to the interests of the company and its stakeholders.

The critical importance of the corporate directors’ functions is in the fact of their independence and experience. Thus, electing the members of the board, shareholders pay much attention to the professional background of the candidates and their working experience within the sphere.

The members of the board should be competent and operate in the industry successfully to guarantee effective supervision. Representing the interests of shareholders, the board members control the financial and dividend issues as well as regulate the basic management questions.

Works Cited

Bateman, Thomas, and Scott Snell. Management: Leading and Collaborating in a Competitive World. USA: McGraw-Hill/Irwin, 2012. Print.

Cross, Frank, and Roger Miller. The Legal Environment of Business: Text and Cases: Ethical, Regulatory, Global, and Corporate Issues. USA: Cengage Learning, 2011. Print.

Ong, Chin Huat, and Soo Hoon Lee. “Board Functions and Firm Performance: A Review and Directions for Future Research.” Journal of Comparative International Management 3.1 (2001): 3-24. Print.