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The structure of the Board of Directors (BOD) or board of trustees is among the most important elements in determining an company’s success. A well-structured board will ensure that all members understand their role and how to fulfill it, and helps to put the organization or company on the right path to achieve its goals.
In essence, the board supervises the executive board of a firm or organization and sets the overall direction for the company. It is also accountable for the hiring and firing of the CEO, establishing the CEO’s salary, determining compensation for other executives in the company, and making crucial strategic decisions.
External or independent directors are non-executive members of a board that do not hold executive positions in the company. They can be paid a fee to participate. They bring a different perspective to the board and are often subject-area specialists in the field that the company operates within.
A two-tier board consists of a management board composed of company executives, and the supervisory board, which is composed of independent directors. The supervisory board is accountable for ensuring that the management’s decisions are carried out in compliance with the corporate policies and laws.
A consultative or advisory board is made up of those who are part of the business. This includes investors or customers. Advisors can offer insight to top executives and offer different perspectives not available within the company. They can also help identify potential growth opportunities and help with the implementation strategies that meet a company’s goals.