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3
Role of the board 
 
The board should be responsible for taking major 
policy 
and 
strategic
decisions.
Directors should have a 
mix of skills
and their 
performance
should be assessed regularly. 
Appointments should be conducted by formal procedures administered by a 
nomination
committee
. 
3.1 Scope of role 
Note that some countries have one-tier boards (the 
unitary system)
and others have two-tier boards. In 
the unitary system the board of directors is legally charged with the responsibility to govern the 
company, serving together on one board comprising both executive and non-executive directors. In the 
two-tier system there is an executive management board of directors and this is monitored by a 
supervisory board of directors. For your exam we will concentrate on a one-tier board system. 
The King report provides a good summary of the role of the board. 

to define the purpose of the company 

to define the values by which the company will perform its daily duties 

to identify the stakeholders relevant to the company 

to develop a strategy combining these factors 

to ensure implementation of this strategy 
If the board is to act effectively, its role must be defined carefully. The Cadbury report suggests that the 
board should have a 
formal schedule of matters
specifically reserved to it for decision. Some would be 
decisions such as 
mergers and takeovers
that are 
fundamental
to the business and hence should not be 
taken just by executive managers. Other decisions would include 
acquisitions and disposals of assets of 
the company
or its subsidiaries that are material to the company and