Board of directors

Definition

A Board of Directors is a group of individuals elected to represent shareholders and oversee the activities and direction of a company. They set broad policies, make significant decisions, and hire senior executives like the CEO.

5 Must Know Facts For Your Next Test

1. Board members are typically elected by shareholders at annual meetings.
2. The Board of Directors has fiduciary duties to act in the best interests of the shareholders.
3. The board often forms committees such as audit, compensation, and governance committees to handle specific tasks.
4. Independent directors are those who do not have a material relationship with the company beyond their directorship.
5. The Chairman of the Board may be separate from the CEO in some companies to ensure a balance of power.

Review Questions

• What are the primary responsibilities of a Board of Directors?
• How are members of the Board typically chosen?
• Why might a company choose to separate the roles of Chairman and CEO?

Related terms

CEO: The Chief Executive Officer is responsible for managing the overall operations and resources of a company.

Shareholders: Individuals or entities that own shares in a corporation and thus have an interest in its performance.

Fiduciary Duty: The legal obligation for one party to act in the best interest of another party, such as between board members and shareholders.