CHAPTER 2 The all-important board of directors

The board of directors, the highest governing authority within a company, offers a fertile source of stories.

Often, however, journalists’ scrutiny seems to come only when problems arise, such as when a company becomes embroiled in accounting scandals, or when its CEO is forced to resign.

But the board’s unique power and its role in charting the company’s activities make it worthy of continued attention.

The board’s responsibilities broadly are to protect the company’s interests and the shareholders’ assets and ensure a return on their investment. All strategic deci¬sions either originate with the board or must be approved by the board. More specifically, the board hires and fires the top executives; monitors company performance; ap¬proves financial statements; decides executive compen¬sation and benefits; assesses and plans for potential risk and makes other major decisions, including whether to approve mergers or acquisitions.

Above all, the board sets the tone for the entire company, ensuring that it acts ethically, legally and responsibly.

For a list of board duties, see OECD Principles of Corporate Governance, “The Responsibilities of the Board,” page 24: