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A board of directors, also referred to as „BoD“ or a „board“, is a group of people chosen by shareholders to represent the interests of that company. Board members develop policies for the overall supervision and management of a business, while protecting shareholder assets. The board acts as a liaison between a company and its investors, supervising and ensuring that the company is operating in a legally responsible manner.
This involves setting the tone of the entire company from the top by establishing the essential rules of ethics. It approves corporate strategies that aim to create sustainable long-term value, selects a chief executive officer who supervises the CEO as well as senior management in managing the business of the company, such as the allocation of capital for growth as well as assessing and managing risks.
The board also examines the financial reports and ensures compliance with the law and regulations. Additionally the board communicates with its people who are involved, such as employees suppliers, customers and the local community as well as others, to comprehend their concerns. It also aims to make a positive impact in these communities.
The company’s board should include a mix of inside and outside members with a mixture of gender, age and ethnicity. In fact, companies with more diversity on their boards tend to perform better financialally than those that don’t. This is because the board with diversity is more likely to offer a variety of perspectives and opinions which can lead to better decisions.