The board of directors of the enterprise refers to the key corporate bodies responsible for business development and ensuring the stability of the company. What are its main functions? How is the board of directors formed?
What is a board of directors?
To begin, consider what can be understood by the term in question. The Board of Directors is the main governing body of the enterprise between the general meetings of shareholders of the enterprise. The main objective of this structure is to develop 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 charter of the company, 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 intracorporate structure under consideration is to manage the activities of a business company - in particular, a joint stock company. But it should be implemented taking into account the fact that certain issues can be directly attributed by the norms of law to the competence of other enterprise management bodies. For example, the same general meeting of shareholders.
Management Establishment Requirements
The Board of Directors is an internal corporate structure that must be established in a joint-stock company in which 50 or more shareholders are present. At least 5 members must be present in its composition.
If there are more than 1000 owners of securities in the joint-stock company, 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 LLC is characterized by certain features. We will 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 indicators of the economic activity of the enterprise.
In practice, the activities of the board of directors in an LLC depend, first of all, on the provisions of the charter of the relevant business company, as well as internal regulations governing business management. The election of the members of the LLC board of directors may not necessarily be based on a cumulative principle: it is sufficient to establish a simple majority of those business participants who vote at the general meeting.
Consider the key powers that characterize the company's board of directors, in more detail.
The main powers of the management structure
First of all, the corresponding internal corporate structure is authorized to exercise control over the work of executive bodies - but not to interfere with decision-making procedures by them, as we noted above. The main thing here is to ensure compliance of their activities with decisions adopted at general meetings of shareholders of the enterprise. Carrying out this area of activity, for example, in a joint-stock company, the board of directors forms corresponding executive structures upon the recommendation of the head of the company. By agreement with him, the board of the joint-stock company may be authorized to make decisions related to the disposal of certain property, with issues of investment, conclusion of major transactions, the value of which exceeds a certain percentage of the company's turnover.
The board of directors of an JSC (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 powers related to the submission for discussion within the general meeting of issues related to the necessary reduction in the amount of the authorized capital of the company.
The board of directors is the body that in many cases is responsible for the distribution of 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. Moreover, with regard to dividends, the powers of the general meeting of shareholders usually do not include the determination of their value 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 relevant payments without coordination with the structure under consideration.
Another noteworthy type of authority that characterizes the board of directors is participation in determining the structure of enterprise management, the establishment of 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, decisions of the board of directors in this case may be mainly of a recommendatory nature.
It can be noted that the board of directors is a corporate body, which can be called differently. So, in accordance with the legislation of the Russian Federation, the corresponding structure can be called the Supervisory Board.
Functions of the management structure: determination of the development strategy of the company
Let us now consider what specific functions can be performed by the board of directors of a bank, an industrial enterprise, a service sector company - despite the fact that the activities of firms largely depend on its profile, on the segment of activity, the main functions of the corresponding internal corporate structure can be common to most areas business.
The main function that characterizes the work of the board of directors of a modern enterprise is to determine its development strategy. That is, long-term priorities are established in the development of the company. At the same time, managers who are members of the board of directors can pay significant 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 council is to approve long-term plans for the development of the company. The approach is widespread, according to which they are approved once a year, and in order to consider the relevant document, an annual meeting of the board of directors is convened. In the framework of this function, the internal corporate structure under consideration can actively interact with other competent bodies of the enterprise - for example, with the financial department, marketers, accountants, and contact external structures and consultants.
The result of the implementation of the considered function by the council is the formation of documents that are binding on the 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 performed by the board of directors is to exercise control over the financial and economic activities of the enterprise. This area of activity of the considered internal corporate structure is aimed, first of all, at ensuring the fulfillment of the provisions of those plans that are being formed as part of the fulfillment by the council of the previous function.
The system of control over the activities of responsible specialists within the framework of the fulfillment of their requirements, which are 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 implementing the enterprise development plan are expected. The performance of the function under consideration by the board of directors must comply with the requirements of the law if certain areas of the managers' activity are in the jurisdiction of certain sources of law.
Other leading structures of the business company, such as, for example, the board of shareholders, can play a crucial role in monitoring the implementation of the plan. The board of directors can actively interact with them on a wide range of issues. In particular, the development of an effective strategy in building a risk management system that characterizes the development of a business can be a common theme of relevant corporate structures. Only if such a resource is available will an enterprise be able to fulfill the plans worked out by the board of directors as part of its previous function. Among the relevant risks are currency restrictions, low liquidity, the appearance of legal restrictions, and a political factor. They should be considered as part of the monitoring of the implementation of the business development plan.
Functions of the management structure: protection of the rights of owners and shareholders
Another major function performed by the board of directors is to ensure the protection of the rights of owners and shareholders of the enterprise, resolving 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, those associated with the appointment of a person responsible for exercising the rights of business participants and protecting their interests. Settlement of disagreements 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 there are legal relations with the participation of partners.
Functions of the Board of Directors: ensuring the effective functioning of 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 norms or the provisions of regulatory legal acts if they regulate a particular line of activity of the executive bodies of enterprise management. This function involves giving the board a fairly wide range of powers - for example, related to the appointment and dismissal of the general director of the enterprise.
Member of the Board of Directors: nuances
A member of the board of directors is any individual, and it is not necessary that he is a co-owner or shareholder of a business company. This status, however, from the point of view of authority is characterized by a number of restrictions. 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 may be elected to their position only by cumulative voting. At the same time, the person receives the appropriate status for the 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 members of the business have the same status.
Consider the features 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 post from among the members of this internal corporate structure. Moreover, this procedure should be carried out at the first meeting of the Council. In many cases, the chairman of the body has the widest range of powers. So, the practice is widespread in which it directly affects the activities of the general director of the company 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);
- Moderation of discussions on business issues;
- Monitoring compliance with meeting regulations;
- summarizing the discussions.
The head of the relevant structure usually puts various questions to the vote, helps his colleagues adequately consider the arguments for and against the adoption of certain decisions. At the end of the vote, the chairman draws up a protocol of the board of directors, which records the results of discussions on business development.
In many cases, the head of the enterprise management body under consideration also directs various committees. For example - those responsible for personnel matters, for the payment of remuneration.
Compensation of labor of members of the board of directors is a significant aspect of the activities of the relevant structure. We will 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 framework of competencies, which are determined by law or local regulatory acts of the enterprise. In many cases, remuneration for solving tasks that characterize the activities of the board of directors is stipulated 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 working as a member of the board of directors is transferred to him along with the main salary for his position in the management structure of the company.
The approach is also widespread, according to which business participants in the status of members of the board of directors receive remuneration, the value of which is determined based on the results of the activities of the corresponding internal corporate structure. At the same time, an individual approach can be applied - 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.
The results that this or that decision of the board of directors brought can be evaluated in terms of business performance, growth in the company's revenue, 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 for protection against the negative consequences of decisions made, as well as cover various costs that arise in overcoming the consequences of these decisions. But the definition of managers' responsibility in the status of members of the board of directors can also be fixed in the contract, according to which the company that established the corresponding internal corporate structure can compensate for some of the losses.