The notion of a governing board is to provide authoritative representation within organizations whose interest is jointly held by multiple individuals. For instance, machinery manufacturer Caterpillar Inc. is owned by literally millions of people who have purchased stock in the company. Their relative number of shares equates to their percentage of ownership in Caterpillar. Along with the financial stake, ownership also translates into voting rights for electing members of Caterpillar’s governing board.
The governing board for a corporation or a non-profit is referred to as the board of directors. College and University institutions carry the terms board of trustees or board of regents. At the K-12 level, we use the common term board of education. The selection of the members of each governing board is made by vote of the stakeholders.
The most common vote cast by corporation stakeholders is for the purpose of selecting the members of the board of directors at the annual shareholders meeting. Board members of privately held educational institutions are typically selected by the standing board members. For public educational institutions, both university and K-12, the represented citizens select the board members through the civic election process.
Governing boards are structured in generally the same manner, whether a corporate board of directors, a university board of trustees, or a board of education. Their duties include: guiding the organization by way of broad policies and objectives; appointing, supervising, and compensating the chief executive officer; managing the availability of financial resources; approving overall annual budgets; and accounting for the organization’s performance to the stakeholders.
For a corporation like Caterpillar, the board of directors is a group of 15 professionals who are entrusted by the shareholders to ensure a good return on their investment. The Chairman and Chief Executive Officer (CEO) reports to the Caterpillar Board of Directors. And all employees ultimately report to the CEO. Should the company not perform well, the board is expected to make adjustments to financing or, when necessary, a change in leadership personnel. And shareholders meetings afford the opportunity for the stakeholders to ask driving questions and register their opinions as the ultimate organization authority.