How To Form a Board of Directors

As part of the articles of incorporation of any firm, you will need to specify a certain number of people to sit on your corporation's board of directors. This is applicable to companies that are being incorporated, or even non-profit organizations that wish to file as a formal entity. A board of directors serves as a corporation's governing body. While it doesn't have direct authority in executing day to day management decisions, a board is responsible for making the big decisions that affect company policy. Therefore, you need to consider the skills and characteristics of people who will be part of the board of directors.

  • Specify details in your company bylaws. When you submit your documents for incorporation, you need to submit the rules and bylaws of your foundation or corporation. You should include the qualifications for each director, how many directors you will have on the board, and their compensation (if you are establishing a for-profit corporation). Define the way by which directors are selected-are they appointed, voted for by majority, or is there a specific person or group who can make a selection? This might depend on ownership of shares, as each director can represent a certain proportion of the shareholders, depending on their level of stock ownership.
  • Choose people with knowledge. A corporation's board of directors is tasked to decide on major policies, and they are also responsible in choosing the top executives of a corporation. The board should therefore be knowledgeable in the field or industry in which your corporation or foundation is involved. They should be able to make decisions that are appropriate to the situation of the company at any given time.

    Sometimes the board can select the chief executive from among themselves (who can act as both CEO and Chairperson of the Board). But most of the time, the board will appoint someone from outside of their group.

  • Choose a well-rounded team. Directors should not only be knowledgeable, but it's also a good idea to select these from among different backgrounds. This is to ensure that their contributions are well-rounded, and that you can approach decisions from different points of view. One director might have technical knowledge, while another could have knowledge of the law. Another might have experience with human resources, while another could perhaps have connections with government. You can define these specifications in the bylaws.
  • Divide the board into committees. Corporations usually hold regular board meetings, and this could be as frequent as possible, or only as necessary. If it's not always easy to convene the board into a full meeting, then your bylaws can also set up committees that can handle specific needs. For instance, you can set up a committee for selecting executives-they could do the legwork, and present their recommendations to the entire board at the next meeting. Or you can set up a committee for managing staffing-related concerns. The important thing is to keep things moving in the event that the board cannot be convened in its entirety as often as the company needs.

As earlier mentioned, a corporation or foundation's board of directors has the important responsibility of making decisions that affect a company as a whole. And so the people that should form this group should be able to share knowledge and arrive at decisions that are beneficial to a corporation's sustainability.


Share this article!

Follow us!

Find more helpful articles: