Board of directors - what is it? Functions and duties of the board of directors

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The Board of Directors of the enterprise is one of the key internal corporate bodies responsible for business development and ensuring the stability of the company. What are its main functions? How is the board of directors of an enterprise formed?

What is a board of directors?

To begin with, let's consider what can be understood by the term in question. The Board of Directors is the main governing body of the enterprise in the periods between the general meetings of shareholders of the enterprise. The main task of this structure is the development of a business development strategy, as well as control over its implementation by authorized divisions of the company.

Despite the large amount of authority, the board of directors, as a rule, does not directly affect the work of the executive structures of the enterprise. He must carry out his activities on the basis of the company's charter, as well as local regulatory sources - such as, first of all, the Regulation on the Board of Directors, which is adopted by the general meeting of shareholders of the company.

The main function of the internal corporate structure under consideration ismanagement of the activities of a business company - in particular, a joint-stock company. But it must be carried out taking into account the fact that certain issues can be directly attributed by the norms of the law to the competence of other enterprise management bodies. For example, the same general meeting of shareholders.

Requirements for the establishment of a management structure

The board of directors is an intra-corporate structure that must be established in a joint-stock company with 50 or more shareholders. It must have at least 5 members.

If there are more than 1000 securities holders in the JSC, then at least 7 members must work on the board of directors. If there are more than 10,000 shareholders, then at least 9 members must be present in the structure under consideration.

The board of directors in an LLC is characterized by certain features. Let's study them in more detail.

Board of Directors of LLC: nuances

The board of directors of a limited liability company in accordance with the legislation of the Russian Federation is a structure that can be established based on the preferences of the owners of the LLC, that is, its formation is not mandatory, regardless of the performance of the enterprise.

In practice, the activities of the board of directors in an LLC depend primarily on the provisions of the charter of the relevant business entity, as well as internal regulations that determine the business management procedure. Election of members of the board of directors of an LLCbe carried out optionally on a cumulative basis: it is enough to establish a simple majority of those business participants who vote at the general meeting.

Let's consider the key powers that characterize the board of directors of the company, in more detail.

Main powers of the management structure

First of all, the relevant internal corporate structure is authorized to exercise control over the work of the executive bodies - but not to interfere in their decision-making procedures, as we noted above. The main thing here is to ensure that their activities comply with the decisions taken at the general meetings of shareholders of the enterprise. Carrying out this line of activity, for example, in a joint-stock company, the board of directors forms, on the proposal of the head of the company, the relevant executive structures. By agreement with him, the board of a joint-stock company may be authorized to make decisions related to the disposal of one or another property, investment issues, conclusion of large transactions, the value of which exceeds a certain percentage of the company's turnover.

The Board of Directors of OJSC (after the reform - JSC) in most cases is authorized to determine key areas of internal corporate policy in terms of obtaining or issuing loans, providing guarantees, using various sources of cost coverage and satisfying possible claims from creditors. The structure under consideration may have the authority associated with the submission for discussion within the framework of the general meeting of issues related to the necessary reductionthe size of the authorized capital of the company.

The board of directors is the body that in many cases is responsible for distributing the company's profits. For example - in the form of dividends in favor of shareholders or, alternatively, in the form of remuneration paid to employees of the company. At the same time, with regard to dividends, the powers of the general meeting of shareholders usually do not include setting their amount without taking into account the opinion of the board of directors. But in many cases, this body has the right to reduce the amount of the relevant payments without agreeing with the structure in question.

Another noteworthy type of authority that characterizes the board of directors is participation in determining the structure of enterprise management, establishing branches, subsidiaries. This area of activity of the relevant structure involves the participation of its representatives in the general meeting of shareholders. At the same time, the decisions of the board of directors in this case can be mainly advisory in nature.

It can be noted that the board of directors is a corporate body that can be called differently. Thus, in accordance with the legislation of the Russian Federation, the relevant structure may be referred to as the Supervisory Board.

Functions of the management structure: determining the company's development strategy

Now let's consider what specific functions the board of directors of a bank, an industrial enterprise, a service sector company can perform - despite the fact that the activities of firms largely depend on its profile, on the segment of activity,the core functions of the respective intracorporate structure may be common to most business areas.

The main function that characterizes the work of the board of directors of a modern enterprise is the definition of its development strategy. That is, long-term priorities in the development of the company are set. At the same time, managers who are members of the board of directors can pay considerable attention to solving current problems, considering the current economic situation, taking into account which the business is built.

But, one way or another, the task of the board is to approve long-term plans for the development of the company. A common approach is that they are approved once a year, and an annual meeting of the board of directors is convened to consider the relevant document. As part of the performance of this function, the considered internal corporate structure can actively interact with other competent bodies of the enterprise - for example, with the financial department, marketers, accountants, contact external structures, consultants.

The result of the implementation of the function under consideration by the council is the formation of documents that are mandatory for execution by competent specialists of the enterprise. At the same time, their structure may include the main plan and a large number of various auxiliary sources.

Functions of the board of directors: control over the financial and economic activities of the company

The next most important function that the board of directors performs is the implementationcontrol over the financial and economic activities of the enterprise. This area of activity of the considered internal corporate structure is aimed primarily at ensuring the implementation of the provisions of those plans that are formed as part of the execution of the previous function by the board.

The system of control over the activities of responsible specialists in the framework of their fulfillment of the instructions contained in the plan involves the use of a wide range of methods: a detailed study of reporting documents, training of specialists if necessary, organization of local meetings on various issues of the implementation of the enterprise development plan. The implementation of the function under consideration by the board of directors must comply with the requirements of the law if certain areas of activity of managers are under the jurisdiction of certain sources of law.

The most important role in exercising control over the implementation of the plan can be played by other governing structures of a business entity - such as, for example, the board of shareholders. The Board of Directors can actively engage with them on a wide range of issues. In particular, the development of an effective strategy in building a risk management system that characterizes business development can be a common theme of the relevant intra-corporate structures. Only if such a resource is available, the enterprise will be able to fulfill the plans developed by the board of directors as part of its previous function. Among the relevant risks are foreign exchangerestrictions, low liquidity, emergence of legal restrictions, political factor. They should be considered as part of the control over the implementation of the business development plan.

Functions of the management structure: protecting the rights of owners and shareholders

Another important function performed by the board of directors is to ensure the protection of the rights of owners and shareholders of the enterprise, the resolution of disagreements arising in the framework of corporate legal relations. To implement this function, the structure in question can be endowed with a number of special powers. For example, related to the appointment of a person responsible for exercising the rights of business participants and protecting their interests. Dispute resolution within the company can be carried out both taking into account the provisions of local sources of norms, and subject to compliance with the requirements of regulatory legal acts in whose jurisdiction are legal relations with the participation of partners.

Functions of the board of directors: ensuring the efficient operation of the executive structures

The next key function of the board of directors is to ensure the efficient operation of the executive structures of the enterprise. For these purposes, responsible managers can also use the mechanisms provided for by internal corporate standards or the provisions of regulatory legal acts, if they regulate one or another area of activity of the executive management bodies of the enterprise. This function assumes that the council is given a fairly wide range of powers - for example, those related toappointment and dismissal of the General Director of the enterprise.

Board member status: nuances

A member of the board of directors is any individual, and it is not necessary that he be a co-owner or shareholder of a business entity. This status, however, is characterized by a number of limitations in terms of powers. Namely:

- the composition of the board of directors of the company can be formed from representatives of the collegial body for no more than one quarter, - the chairman of the board of directors cannot be the general director of the enterprise.

Members of the board of directors can be elected to their position only by cumulative voting. At the same time, a person receives the appropriate status for a period until the next annual general meeting of shareholders of the enterprise. A member of the board of directors has powers that cannot be terminated early if other business participants have them in a similar status.

Let's consider the features of the work of the person heading the relevant structure in more detail.

Features of the work of the chairman of the board of directors

Chairman of the Board of Directors - a person who is elected to his position from among the members of this intracorporate structure. However, this procedure must be carried out at the first meeting of the Council. In many cases, the chairman of the relevant body has the widest range of powers. Thus, it is a common practice thatdirectly influences the activities of the company's CEO and other top managers, helps them make decisions, improve their skills.

The head of the board of directors has a number of special competencies. These may include:

- planning the activities of the internal corporate structure headed by him (the chairman determines when this or that meeting of the board of directors should be held, how long it should last);

- moderating business discussions;

- control over compliance with the rules of meetings;

- summarizing the discussions.

The head of the relevant structure usually puts various issues to the vote, helps his colleagues to adequately consider the arguments for and against the adoption of certain decisions. At the end of the voting, the chairman forms the minutes of the board of directors, which record the results of discussions on business development issues.

In many cases, the head of the enterprise management body in question also chairs various committees. For example, those responsible for personnel matters, for the payment of remuneration.

Compensation for members of the board of directors is a significant aspect of the activities of the relevant structure. Let's study it in more detail.

Payment of remuneration to members of the board of directors

In accordance with common practice, remuneration to boards of directors is usually assigned the same amount of compensation for the work performed within the competences that are defined by law or local regulationsenterprises. In many cases, remuneration for solving problems that characterize the activities of the board of directors is provided for by the contract of an employee of the company who is a member of this board. For example, if this is one of the top managers, then compensation for work as a member of the board of directors is transferred to him along with the basic salary for his position in the company's management structure.

An approach is also common, according to which business participants in the status of members of the board of directors receive remuneration, the amount of which is determined based on the performance of the relevant internal corporate structure. At the same time, both an individual approach can be used - when the results of the work of a particular manager are evaluated, and consideration of the results of the work of members of the board of directors as a whole.

What results this or that decision of the board of directors has brought can be assessed in terms of business performance, the growth of the company's revenue, the expansion of markets, and other significant criteria that are determined by the owners of the company.

It can be noted that in Western countries the approach is widespread, according to which members of the board of directors are insured against the negative consequences of decisions made, as well as covering various costs arising in the process of overcoming the consequences of these decisions. But the definition of the responsibility of managers in the status of members of the board of directors can also be fixed in the contract, according to which part of the losses can be compensated by the company that has established the appropriate intracorporatestructure.