Board of Directors - Overview


Included in your bylaws should be the number of directors on your board. There is no limit to the number of board members. Generally, larger companies have larger-sized boards, but an oversized board makes effective corporate governance impractical. For that reason, it’s best to limit the number of directors to about nine for smaller entities.


Your bylaws should also determine how long a board member’s term can last. Term limits are not mandatory, but they can help to easily infuse fresh talent and ideas when the need becomes evident. Limits can be set on both length of term and number of terms served.
Meetings: Many states require you to conduct at least one board meeting per year. Your bylaws should outline when those meetings take place and how and when notices of upcoming meetings are to be made. They should also indicate the size of your quorum (i.e.: the minimum number of directors needed to be present in order to validate the meeting).


Your bylaws should detail the methods to appointing and dismissing chairs. In the case of smaller boards, the chairperson is often the CEO or founder of the business. In larger corporations, a chair can be voted and agreed upon by the members of the board.
Vacancies: Vacancies are bound to happen on any board. As such, it’s important to outline your corporation’s protocol in regard to vacancies.


The basic duty of the board is to oversee operation and ensure profit and progress, but fulfilling that duty requires many other obligations for board members. Planning strategies, making policies and approving finances are just a few of the powers that should be summarized in your bylaws. Powers can also include the authority to create and dissolve committees, appoint and dismiss officers, etc.


Deciding how much to compensate board members can be tricky. In general, a nonprofit board consists mostly of unpaid volunteers. Board members of smaller nonprofits should be present only to aid your cause; if a member demands monetary recompense, that member is probably not right for your organization. In for-profit corporations, compensation varies. Members of Fortune 500 boards can earn a few hundred-thousand dollars a year, but small businesses should generally avoid cash recompense. As with nonprofits, members of for-profit boards should be there to ensure the success of your company. In lieu of cash, stock is a great incentive for directors; it rewards the board members with earnings based on the performance of the company, which should motivate them to ensure the progress of the corporation.