This presentation provides a quick overview of the the purpose, goals and role of the Board of Directors. Finally, it includes a checklist of what information Directors should receive in order to adequately perform their duties. (Quite surprisingly, this information is not provided, or is poorly organised)

1. Financial Analysis Series:
ROLE OF THE BOARD OF
DIRECTORS

2. Goal of the Board of Directors
• The goal of the board of directors is to maximise long-
term shareholder value
There may be other goals as well, but this element is central
Shareholder value includes consideration for minority
shareholders, as appropriate
Long-term value may be differentiated from short-term value if
the company is a publicly held shareholding
© Robin Bhattacharya 2010. All rights reserved.

3. Strategy
• The strategy of the Board of Directors is based on the
specific conditions needed to meet the goal of
shareholder value.
• One example (medium-sized private growth company):
To develop a presence in the Poland and the Czech Republic
To ensure sufficiency of capital to attain this growth
To prepare the company to allow the shareholders an
appropriate exit option (e.g. liquidate the shares via IPO)
© Robin Bhattacharya 2010. All rights reserved.

4. Functions of the Board of Directors
The Board of Directors performs several functions that direct the company's
affairs and control that their directions are being acted upon
• To direct (or to consult) the company both as to strategy
and structure
• To establish from time to time a strategy for the
company, including determining which businesses the
company should be in and those that it should not be in
• To ensure that executive management implements the
company's strategy as established
• To monitor the activities of the executive management
Ref: the King Report, South Africa as reported in Corporate Governance, 2nd edition
© Robin Bhattacharya 2010. All rights reserved.

5. Functions of the Board of Directors (cont’d)
• To ensure that the company has adequate systems of
internal operational and financial controls
• To select the chief executive, ensure succession and give
guidance on the appointment of senior executives
• To provide information on the activities of the company
to those entitled to it
• To ensure that the company operates ethically
• To address the adequacy of retirement and health care
benefits and funding
© Robin Bhattacharya 2010. All rights reserved.

6. Director Information Checklist
• Operating statements, balance sheets and statements of
cash flow comparing current year to plan and to last
year
• Management comments about the above that explain
reasons for variations from the plan and provide a
revised forecast of results for the remainder of the year
• Share of market information
• Minutes of management committee meetings
• Key media articles on the company and competition
For more information, please contact
RobinBhattacharya@yahoo.com
© Robin Bhattacharya 2010. All rights reserved.