What is the primary purpose of establishing a Board of Directors?

The primary purpose of establishing a Board of Directors is to protect the interests of the investors and/or owners. The Board acts as a governing body that provides oversight and ensures that the company operates in a manner that aligns with the shareholders' values and expectations. This includes making strategic decisions that enhance shareholder value, overseeing management performance, and ensuring that the company adheres to its mission and ethical standards.

While ensuring regulatory compliance and profitability are important aspects of a company’s operations, they are typically part of the broader responsibility of the Board to safeguard owners' interests. Regulatory compliance is usually managed within the framework set by the Board, while profitability is seen as a result of the Board’s efforts to uphold those interests. Handling day-to-day operations falls under the responsibilities of management rather than the Board, which focuses more on oversight and long-term strategy. Therefore, the emphasis on protecting investors' interests encapsulates the core function of the Board of Directors.