Board member skills and its impact on company performance

Abstract

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. In an organization with voting members, e.g., a professional society, the board acts on behalf of, and is subordinate to, the organization's full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a non-stock corporation with no general voting membership, e.g., a typical university, the board is the supreme governing body of the institution; its members are sometimes chosen by the board itself. Typical duties of boards of directors include: * governing the organization by establishing broad policies and objectives; * selecting, appointing, supporting and reviewing the performance of the chief executive; * ensuring the availability of adequate financial resources; * approving annual budgets; * accounting to the stakeholders for the organization's performance; * setting the salaries and compensation of company management. Thus the board is the central part of corporate governance and policy making in any firm. When managers of companies typically talk about strategies, they first consider what products to make and second, where to locate the business. All these decisions are taken only at the approval of the board. A board is thus an important forum for companies to conceive, discuss and implement new ideas. Through this project we aim to understand the relationship if any between the skills of a board and the performance of the company. The aim and contribution of this project is to propose and test a model that reflects how the relationship between board characteristics, administration and company age can have an effect on company performance.