Many owners of private companies are interested in creating a board of directors, wanting to increase the stability of the company and find new growth opportunities. Here are basic tips on how to involve new board members.
Why does a company need a board of directors?
The efficiency and stability of a corporation depend on how effectively the corporate governance system is organized. The long-term success of a company is largely determined by its investment attractiveness, its ability to create conditions that will ensure the attraction of investors, the accumulation of financial, intellectual, and organizational resources to achieve goals that are shared by all stakeholders. And the most important role in this process belongs to the board of directors.
For a joint-stock company (JSC), the board of directors is one of the main governing bodies. If mistakes are made in the creation of the council, its decisions may be invalidated in the event of a corporate dispute. At the annual meeting, shareholders must decide who will be on the board of directors of the joint-stock company.
The board of directors is one of the main governing bodies in a joint-stock company, therefore it is important to form it correctly. A lawyer needs to know how to ensure legal cleanliness when creating a board of directors and electing its members so that in the future the work of the board is coordinated and organized, and decisions are not invalidated.
Tips on how to onboard new board members
Here are some tips on how to set up a boardroom in a private company onboarding new board members from scratch so that the company gains new business opportunities as a result:
- We need to find suitable independent directors. It is optimal for directors to have not only industry expertise, but also managerial competencies (for example, in the field of strategy, finance, etc.) and entrepreneurial skills. Personal qualities are especially important: the willingness to get involved in nuances, the ability to withstand pressure, etc. The main thing is not to choose according to the principle of “one candidate from the only possible”, but to consider several candidates for each position.
- Any board of directors has three roles – a supervisory body, a center of expertise, or a strategic management center. They are present in any company, the question is which role is the most important. In private business, it is better to start with the expert role of the council, that is, the role of helping the company to better understand the limitations and overcome them. A monitoring function will gradually be added – when the council helps to form key rules and regulations, for example, in the field of remuneration and management succession, and begins to monitor their implementation.
- The board of directors will be effective only if the owner of the company is fully involved. It must dive into the details, study the topic, carefully approach the selection of independent directors, etc. Creating a board of directors requires serious efforts, but an active and motivated owner will eventually get a stable business, and ultimately, a competitive advantage, which is so necessary for the current situation.
Nomination of candidates to the board of directors of JSC occurs on a general basis. Each shareholder has the right to propose his candidates. If he is refused and the candidates are not included in the list, the shareholder has the right to appeal against the refusal.