What Are Board Competencies?

What Are Board Competencies?

Members of the Board of directors must reasonably and conscientiously, with due diligence and prudence, perform the duties assigned to them in the interests of the company and its shareholders, and achieve sustainable and successful development of the company. Take a look at the other Board competencies in the article below.

Top Five the Most Important Competencies of the Board of Directors

The Board of Directors is a management body elected for a fixed term by the meeting of shareholders, which manages the activities of the joint-stock company during the period of time between the annual meetings of shareholders in accordance with its competence granted to the Board of directors by law and by the charter. In addition, the Board of directors must take into account the interests of other stakeholders, including employees, creditors, and counterparties of the company.

The competence of the governing bodies of a legal entity is a set of powers, rights, and obligations established by law. The competence of the governing body of a legal entity determines its place in the system of governing bodies of a legal entity. The competence of the Board of directors (supervisory Board) of the company includes the following issues:

  1. determining the priority areas of the company’s activities: the company’s development strategy, the need to develop new markets, new types of activities, etc.;
  2. transformation into a status body with several committees and a significant number of directors;
  3. the content of the tasks that the Board of directors sets for management, what questions it asks during meetings, and how carefully it checks the information; as a result, the performance of the company depends.

Competence and Powers of the Board of Directors

The Board of Directors is called upon to resolve issues of the general management of the activities of the joint-stock company. It can accept for consideration and resolve any issues specified by the Federal Law “On Joint Stock Companies” or the charter of the company, except for issues referred by law to the competence of the general meeting. For example, the Board of Directors of a large international corporation may be a fairly formal body with a focus on procedures and regulations. Conversely, the Board of a small company can be quite informal in nature.

In order to exercise control, the Board of directors can be endowed with a number of additional powers: the right to demand reports from the Board, books of the company, verification of cash valuables, etc. Moreover, control is not limited to checking the legality of a particular action on the part of the Board but also includes checking them from the point of view of expediency and commercial need. And although some companies have had problems with the independence of management due to the excessive number of insiders on the Boards, this has not always been the cause of failure.

The power of the Board of Directors is a concept that covers the system of relationships between the executive bodies of the Company, its Board of directors, shareholders, and other interested parties. Corporate governance is the basis for determining the goals of the Company, determining the means to achieve these goals, and mechanisms for controlling its activities by shareholders and other interested parties. And besides, in terms of composition, the Boards of directors of both successfully and unsuccessfully managed companies were, in general, the same.