board of directors

A group of *directors with ultimate responsibility for the *stewardship of an organization. Boards of directors have been described as "inescapably, the centre of the (corporate) governance system" (Cadbury, 2002, 33). Boards exercise their governance duties in several ways: they (i) elaborate strategies and plans for an organization, (ii) define *internal control strategies, (iii) oversee and report on *external control, (iv) provide leadership to an organization, and (v) address the concerns of *stakeholders. A main board of directors (or "top table") may delegate some of its authority to subordinate boards (e.g., in operational divisions and overseas * subsidiaries), but it retains overall responsibility for an organization’s stewardship. The responsibilities of a board of directors can be distinguished from those of an organization’s *managers - a board has a strategic oversight role, while management takes charge of day-to-day operations. This difference has been summarized by the *National Association of Corporate Directors in the acronym NIFO - "nose in, fingers out" (NACD, 1996). Individual *inside directors, however, may have to juggle the potentially conflicting responsibilities of directing and managing an organization. In English-speaking countries, a board of directors tends to have a unitary (or single-tier or monistic) structure. In contrast, two-tier (or dualistic) boards are the norm in continental Europe and some other parts of the world. In Germany, for example, a corporation’s supervisory board (made up of representatives of *stock-holders and employees) appoints a management board to run the corporation’s day-to-day business. This arrangement is intended to promote social partnership between various parties interested in an organization’s stewardship, and to avoid an excessive concentration of power within the board structure. Although there is little evidence of moves toward a two-tier structure in the English-speaking world, the increasing importance of *outside directors may be interpreted as an enhancement of independent oversight within the unitary board structure. See also *audit committee, *remuneration committee, and *tone at the top.