Board of Directors: 5 Key Functions

The board of directors is often perceived as a formality. However, its true value is revealed when it is composed of various specialists and performs its functions to the fullest. Especially in family businesses, where management and ownership often overlap, a well-functioning board can become a decisive factor for long-term success.

Five key benefits of an effective board

1. Access to diverse expertise
Even the most experienced managers cannot possess all the necessary knowledge. A board comprising specialists from different fields allows companies to compensate for missing skills and make more informed decisions.

2. Balance between different interests
The board acts as an arbitrator between owners and operational management. It reduces the risk of conflict and ensures that strategic goals and day-to-day management are aligned.

3. Independence and accountability
The board of directors has a dual role – advisory and supervisory. It monitors the company to ensure that it operates in accordance with the law, ethical standards, and best practices, while protecting the interests of shareholders. The presence of independent members is particularly important as it brings a fresh perspective and objectivity.

4. Focus on long-term strategy
While the operational team is busy with day-to-day tasks, the board can look ahead to the vision for the next 5 or 10 years. It is the place where priorities are set, strategy is formulated, and the trap of “eternal fires” is avoided.

5. Transparency and trust
Companies with an active and well-functioning board send a strong signal to investors, banks, and partners: the organization is stable, transparent, and has a clear structure of responsibilities. This strengthens its reputation and facilitates access to financing and new opportunities.

Two main models of board operation

1. Advisory model
In this option, the board serves as a discussion platform. Members give recommendations and advice, discuss alternatives, and offer new perspectives, but the final decisions remain entirely in the hands of the owner or CEO. The board makes key decisions after engaging in reasoned debate and drawing on broader expertise.

2. Decision-making model
In this approach, the board has real power and can make decisions that are binding on management. This means that in certain situations it can act independently of the will of the majority owner – even at critical moments, such as the replacement of a CEO. Although more challenging for owners, this model provides a higher degree of objectivity and protection of the company’s long-term interests.

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