QS Study

Functions of Board of Directors

Board of Directors is a committee that responsible for all activities of the company. Different segments of the company are controlled by each of the directors. Individually, directors, have no power make the decisions about the company. The board of directors selects their functions and responsibilities in the meeting of the board of directors. Functions of board of directors are two types; (i) Statutory activities and (ii) Executor activities. According to Companies Act and the constitution of the company, the board of directors selects their functions. Functions of board of directors are given below:

Trustee of all concerned: Board of Directors work as the trustee of the company for all concerns parties. It keeps the benefit of all stakeholders. Maintaining supplies according to the demand and keeping a balance between company and shareholders. It takes basic decisions approve the decision of managers, gives advice to managers, validate the activities and functions for future.

Formulation of Objectives and Policies: Every company has specific objectives and mission. Policies are the standards for planning. Board of Directors selects the objectives and policies for the company in general meeting. Board of Directors selects the strategy and activities to reach those objectives.

Appointment of Employee: Board of Directors appoints the chief executive for the daily activities. Existing employee or one of the directors can be appointed as chief executive. In spite of that executives are appointed to a different level of management.

Approval of Budgets and Programs: Budgets and programs are known as a master plan for a company. It is basically approved by the chief executive. Chief executive determines the budgets and future programs by consulting with heads of the departments. Then those plans are presented in general meeting in front of the board of directors. Board of Directors then approves those budgetary plans.

Evaluation of Executive Performance: It is one of the vital duties of a board of directors to evaluate the performance of executives. Activities of the company must be done by the pre-planned programs. Board of Directors controls the activities of all executives.

Preserving Company’s continuity: Board of Directors is the trustee of the company. The flexibility of the company is to be maintained for the development of the company. Directors keep careful concentration on the current economic situation. To keep management development plan and market standard, directors have to be cautious about new technology and ideas.

The delegation of Authority: Policies and plans are taken by the authority. According to these duties and responsibilities are delegated to the subordinates.

Statutory Function: Directors have to perform following statutory activities –

  • Selling of shares and debentures by prospectus
  • Distribution of shares
  • Coiled of share price
  • Closing of shares on default
  • Announcing different meetings
  • Appointment of additional director alternative director and casual director
  • Receiving of credit on behalf of the company
  • Investing in the fund of the company appropriately etc.

Financial Function: Financial function is one of the main duties of directors. The essential capital of the firm and other financial needs have to be maintained by directors. For these, they issue shares and debentures.

Management Development Program: Manpower and material power are kept in the hand of directors. They have to take necessary steps in the development of management program. For this purpose, directors have to appoint eligible executives and delegate them in perfect position.

Board of Directors is the architect of future planning of the company. It has to work with full of power, unity, and intelligence. A company cannot be developed without the full empowerment of the directors.