Definition of board of directors

Definition

A corporation has a board of directors, a group of people whose legal obligation is to oversee the company and ensure it serves the best interests of the shareholders. Public companies are legally obligated to have a board of directors, while private companies often elect to have one. The board typically consists of inside directors, such as the CEO, one or two founders, or executives employed by the company, and outside directors, who are not involved in the day-to-day workings of the company. These board members are elected individuals who have legal, corporate governance rights and duties when it comes to voting on key company decisions. A board member is said to have a board seat at the company.

Related terms

More from The Holloway Guide to Equity Compensation

Fundamentals of Stock Corporations › Governance

Boards of directors range from 3 to 31 members, with an average size of 9. Boards are almost always an odd number in order to avoid tie votes. It’s worth noting that that state of California requires public companies to have at least one woman on their boards.

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