What's The Job of The Board Of Directors Today?
At the beginning of the year, Billionaire business man Mack Zuckerberg announced the addition of Dana White (UFC president), John Elkann, and Charlie Songhurst to join the board of directors for Meta Inc and people met it with mixed reactions. A lot of employees have a lot to say about the additions but then this isn't something that is unusual. Companies like Boeing just added Steve Mollenkopf who was the former CEO of the Vanguard groups and serves as board member in Pfizer into their board of directors. But what do Board of Directors actually do or what are they supposed to do?
Being a member of the board of directors of a company isn't a full time job with appearances usually monthly or quarterly unless there is a problem in the company. When they come for this monthly or quarterly meeting, they come to get information on how the company is going which is presented to them either by the CEO or a major member of the team that is an exec. Most time, they bring in their CFO when they want to talk about the finance of the company and their COO when they want to talk about a new development they want to invest money into.
When this is done, the boards major role is to provide advise to the executives but in cases where there is a reason not to go on with such decision, it is the job of the board to veto the ideas of the leadership of the company. So in one word, the board acts in the interest of the shareholders they represent. As a CEO, it is not important to pay attention to their thoughts but when this happens, the board can fire them, so for the benefit of keeping their jobs they pay very well, the CEOs tries their best to keep the board members happy. The board also oversees compensation of the executives as well as shareholders, so they do a lot when it comes to checking and balancing the decisions and running of the corporation.
While the job of the CEO is to make profit and prioritize short term gains, it is the job of the board members to think about the future of the company and ensure that the company is safe while the board members ensure this happens, directors in the company do not even need to show up for these meetings technically. Actually, board of directors are paid very high and they just come for meeting monthly or quarterly making decisions and there is nobody to take them away from the seat as they cannot be fired. Also, some people sit on board of directors of lots of companies that are publicly traded and are paid well but how can one become a member of the board of directors.
The first way is to be nominated as a member of the board of directors before the company goes public and the easiest way to do that is to start a company yourself and add yourself to the member of the board of directors along with one or two family members. Another way is to become an early investor which would insist on sitting on the board of directors as a return for your investment. Another way is to get elected into the board of director of publicly traded company.
Back to our modern world and what board members do now. If you see someone who seats on the board of a publicly traded company, check them well, they are going to be a network to political good will, or connection to other businesses and business leaders. This is why they are always old and the average age of a board of director member is 60 years. The job is given to them because they have worked their way to knowing people, meeting with powers that make things happen, and long list of connections that will be needed by the company.
It is difficult today to say if the board of directors are representing the interest of the shareholders or they are there voted in by some asset managers and company chairman who want to be in connection to power and strengthen ties with other companies. Well, we could also say those are shareholder's interest or what do you think?
Posted Using INLEO