Importance of Board of Directors
Running a company regardless of its size, in a fast-paced globalized world comes with a host of opportunities and challenges. Therefore, having people who possess the ability to take the right decisions at the right time can be a game-changer for any company. Companies end up making wrong decisions despite their efforts to prevent such an occurrence because of the lack of information or the absence of expertise to decipher that information. A CEO or the owner does have the qualification and experience that makes him capable to take smart decisions but this doesn’t outweigh the amount of expertise and skills the board can bring to the business. A common fear of losing control or limited resources to have a board from the owner’s viewpoint is valid, but what most of the owners fail to observe is that the board steers the company in a strategic direction and may provide a competitive advantage. A board of directors is simply a group of experienced individuals working on a common objective to grow the company. A single person can’t have a holistic view of all the factors that need to be evaluated before a decision is made. A huge factor of bias and short-sightedness gets eliminated as the board focuses on the company’s long-term growth. The importance of clarity in roles and responsibilities throughout the company cannot be ignored as it has the ability to make or break the company. The Board of directors ensures that the vision and mission are clearly communicated throughout the company, preventing ambiguities that distort the company’s goals. It is essential to have a body within the company that ensures smooth operation and this is possible if that body provides a framework that includes procedures rules, principles, and processes by which a company is directed and controlled. Boards should be kept independent to act in the best interest of the company which is why instead of being subjective they should be objective without compromising their judgment and taking a solid stand where needed, However, like all business decisions it is for the company to decide if it chooses to invest its resources in having a Board of Directors. Also having the board will not be sufficient if the structure and composition of the board are not aligned with the company’s objectives. A strong and competent Board can indeed prove to be an invaluable asset for the company, one that can become a key to success in creating the wealth envisioned by its primary stakeholders. For smaller companies, having a board may seem farfetched and impractical however the advantage of collective knowledge should never be ignored. There are various solutions to that starting with finding a business mentor, involving a family member or a friend, or working closely with your accountant. The basic idea is to involve more people in decision making and appraisal processes. At Ali Syed CPA, we can help you in finding solutions.