Banks and other lenders typically require business customers to have a board of directors. There is a really good reason for this. A board of directors ensures the company remains in compliance with the law and the requirements of any loans they receive. In some cases, the board is involved in strategy and appointment the chief executive officer for the company. Without a board of directors, the company leadership would be free to take the company in any direction they like without any oversight.
Potential for Conflict
There is always potential for conflict when driven personalities are involved. The board of directors is loyal to the company’s stakeholders and may limit the risks a CEO takes. When the CEO thinks they are right and the board doesn’t have confidence in the CEO, there is sure to be conflict. There is a way to avoid much of this conflict. Independent directors are unbiased representatives. They serve the stakeholders but they won’t allow personal feelings about the CEO to cloud their judgment.
Advantages of Using an Independent Board
The main advantage of hiring an independent board is that the company is in control of the duties of the board. An independent board will not conspire to oust a leader but it will ensure the CEO, COO or CFO do not make decisions that negatively impact the company. A business must take risks to compete but too much risk could disqualify a company for a loan. An independent board could be assigned the duty to ensure the company meets the lender’s requirements.
Although a board may slow down the process of making major changes in a company, there are very good reasons for this oversight. Not only does it give the company a better chance for longevity, but oversight also ensures the stakeholders’ interests are considered before anything else. When the only reason a company has a board is to satisfy a lender’s requirements, the directors should Learn more about Independent Director Services before appointing board members. Using this service could give the company more control over its future while still allowing it to take advantage of loaned money.