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 ensure that the company's management acts in the best interests of its shareholders.

5 Must Know Facts For Your Next Test

1. The board of directors is responsible for making major decisions such as mergers, acquisitions, and approving annual budgets.
2. Members of the board are typically elected by shareholders during an annual general meeting.
3. Boards often include both internal directors (company employees) and external directors (independent from the company).
4. One key role of the board is to appoint and evaluate the performance of the CEO.
5. Committees within the board, such as audit committees, play crucial roles in corporate governance and financial oversight.

Review Questions

• What are the primary responsibilities of a board of directors?
• How are members of a board typically chosen?
• What is the difference between internal and external directors on a board?

Related terms

Shareholders: Individuals or entities that own shares in a corporation.

Corporate Governance:

The system by which companies are directed and controlled, involving various stakeholders including boards.

CEO (Chief Executive Officer): The highest-ranking executive in a company responsible for overall management decisions.