A board of directors has direct involvement in strategic decisions relating to profitability. In private companies, the board is composed of key business stakeholders. In public companies, board members are elected by shareholders. In all cases, board members provide oversight to make sure the company operates ethically and efficiently -- because unethical business operations lead to costly regulatory and legal fines, and inefficient operations can cut heavily into profits.
Board of director involvement is integral to determining who should lead the company. If a chief executive officer must be dismissed or a new CEO selected, the board makes decisions in the interest of stockholders, with the end goal of finding a leader who can drive the company toward maximizing profitability. The board of directors oversees the search for a new CEO, directing a team of leaders from human resources and other key business functions.
Major investment decisions, such as to expand the company's portfolio through acquisition, require the board involvement and approval. Other financial decisions requiring board approval can include adjusting salary structures or benefits packages and methods the company will use to invest funds for employee retirement programs. If a private company decides to go public, the board is directly involved in the valuation of the business for future shareholders.
A board of directors provides workplace oversight for strategy planning. After the CEO presents strategic objectives for a fiscal year, the board votes on those expected to be most beneficial for the workplace, factoring expected risks, rewards and time frames. In a public company, the board's strategic decisions relating to the introduction of new products or services have a direct effect on stock performance. Strategy planning is aligned to financial investments to support research, development, future product offerings and marketing.
Policy decisions affecting compliance from ethical, financial and regulatory standpoints require board oversight. The board makes sure company leaders establish a governance framework for developing, implementing and auditing policies that support business and legal requirements. The framework identifies the rules and bylaws for the governance system, how polices are approved and time frames for introducing polices within the workplace.