Board of directors

A board of directors is a group of individuals chosen by the stockholders of a company in the Annual General Meeting to promote their interests through the governance of the company. Board members in most legal jurisdictions have specific fiduciary duties, whereby they act for the benefit of others.

Related Topics:
Stockholders - Company - Annual General Meeting - Fiduciary

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In the United States and most other industrialized countries the board hires a chief executive officer (CEO), President, and other professional managers to run the day-to-day operations of the company, while the board retains a high-level form of oversight. Typically corporate boards are involved in issues of ownership, strategy, financing, and mergers and acquisitions.

Related Topics:
United States - CEO - President - Managers - Ownership - Strategy - Financing - Mergers and acquisitions

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The actual power held by the board of directors varies widely from company to company. In some companies, the board of directors form a powerful body to which senior management is subservient. Other times, the board is a formality which merely rubber stamps decisions of the CEO and senior management.

Related Topics:
Rubber stamps - CEO

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The board is run by the chairman of the board, who may or may not be an employee of the company. Often the CEO serves as the chairman. Some hold that this is inappropriate in a publicly-held company, for, they contend, it gives management too much power over the board, which is supposed to provide oversight of management.

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In larger companies the board is partitioned into several committees with specific tasks. For example, a compensation committee is commonly formed to make decisions regarding salary and stock allocations for top management (and sometimes for the entire employee pool). Others might include an audit committee, a legal affairs committee, and a mergers and acquisitions committee.

Related Topics:
Compensation - Mergers and acquisitions

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It is widely considered good management practice to create a board of directors with persons with expertise from diverse backgrounds and to have outside directors who can provide a perspective on a situation which is independent from management. For example it is extremely common for a good percentage of the boards of most large corporations to be from academia, especially business schools. Sometimes relatives of powerful politicians are selected to serve on boards, such as when Hillary Clinton served on the board at Arkansas-based Wal-Mart while her husband, Bill, was Governor of Arkansas.

Related Topics:
Outside directors - Hillary Clinton - Arkansas - Wal-Mart - Bill - Governor of Arkansas

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