The attention that is paid at the legislative and practical levels to the composition of the board of directors (supervisory board) of a business entity is due to the importance of issues within its competence. The composition of the board must be balanced in such a way that it can solve the assigned tasks in the interests of all shareholders (participants) and the company as a whole.
Number of Members of the Board of Directors
The Board of Directors is a decision-making body, not an advisory body. It is a strategic management body whose main task is to carry out general (guiding) management of the company’s activities, as well as supervisory and supervisory functions. His competence primarily includes the most important issues of the Company’s management, such as determining the strategy, investment, and budget planning, establishing a system of motivation and evaluation of management activities, as well as supervision of the company’s assets and the reliability and efficiency of risk management systems, internal control, internal audit and the system corporate governance.
Currently, the law establishes the minimum quantitative composition of the council: at least five members. In addition, the previous requirements on the size of the board for various categories of joint-stock companies, depending on the number of shareholders, have been retained. The board of directors is one of the main governing bodies, so it is important to form it correctly. A lawyer needs to know how to ensure legal purity when creating a board of directors and electing its members so that in the future, the activities of the board are well-coordinated and organized, and decisions are not invalidated.
A timely and effective Board assessment can (and should) be performed at any point in the project lifecycle when appropriate and appropriate. All this is reflected in the list for performance evaluation:
- Define performance evaluation goals.
- Choose a performance evaluation mechanism.
- Identify participants.
- Analyze the results.
- Apply the results of the evaluation as necessary in accordance with the objectives defined in the paragraph.
What Are the Characteristics of an Effective Board Member?
Before talking about specific methods for assessing the success of Board Members, it is necessary to define what is meant by an effective team, its features, and its criteria. A Board team is considered effective if it performs the main task of the project form of activity: it creates conditions for maximum revealing and using the potential of each participant and also contributes to the formation of a synergy effect due to the mutual reinforcement of the results of all team members.
An effective Board Member should be subject to the following principles:
- selection of team members according to their skills, abilities, and capabilities;
- determination of the goals of joint activities and rules of conduct;
- awareness of team members of their rights;
- continuous interaction in the team, allocation of the necessary time for communication;
- feedback, rewards, and recognition.
When solving the task of evaluating the performance of both individual members of the project team and the team as a whole, the greatest difficulties are the choice of performance indicators, their addition to the system, the definition of individual and group indicators, the choice of methods and the construction of a process for monitoring performance indicators.