A formal corporation is required to have a board of directors. Part of the value of having such a board is in formalizing major decisions of the company rather than having the entrepreneur/founders run the business by the seat of their pants.
In “Onward” Starbucks CEO Howard Schultz provided a couple of interesting insights on this subject. Concerning the purpose of a board:
“Board of directors do not exist to manage companies, but rather to make sure companies are managed well.”
The management of the company is accomplished by the officers of the company, the board of directors provides the expertise and accountability for the corporate officers. However, in order to be effective, the board of directors must be in the know:
“Boards are at their best, I believe, when directors have complete transparency so they can provide informed guidance, offering an outsider’s experienced perspective to push a company’s management further than they might otherwise go.”
A board of directors is a critical element to the success of a scalable business.
1. Howard Schultz. Onward: How Starbucks Fought For Its Life Without Losing Its Soul: