Board of Directors

The board is responsible for appointing and, if necessary, replacing the chief executive and senior management, approving strategy and major investments, overseeing financial reporting and risk, setting executive pay and declaring dividends.

Boards usually include executive directors, who are also managers of the company, such as the chief executive and chief financial officer, and non-executive directors, who are not employed by the company and provide independent oversight. A chair leads the board.

For example, when a company considers acquiring a competitor, management prepares the proposal, but the board must review and approve it, often after advice from independent advisers.

Board structures vary between countries. Many, such as the United Kingdom and the United States, use a single board. Others, such as Germany, use a two-tier system, with a supervisory board overseeing a separate management board, and include employee representatives. Board effectiveness depends on independence, relevant skills, diversity of views and willingness to challenge management.