Definition of Board of Directors

A board of directors is a group of individuals elected by the shareholders of a company to oversee the management of that company. Boards traditionally meet at the conclusion of every quarter to discuss company problems, growth, profits, market trends and future development.

A board of directors may be elected from all facets of an organization.

History

The concept of a board of directors arose at the beginning of the 20th century, when the number of shareholders in large companies began to expand across vast geographic and political boundaries. A system of representation was necessary to voice all shareholders desires.

Duties

Boards of directors govern company laws and objectives, appoint and review chief executive officers and other prominent posts, approve budgets and are as a body accountable to the shareholders for the company's performance.

Legal Responsibilities

The members of a board of directors assume legal responsibility for all company activities. If a company breaks a law, its board members may be prosecuted.

Election

Members of boards of directors are often selected from outside a company and are customarily elected during shareholder general meetings.

Length of Terms and Dismissal

Some companies place restrictions on the duration a person my serve as a board member, while some companies elect members for life or until they resign. Illegal conduct or conduct detrimental to the company and shareholders often results in dismissal.

References

• Investor Words
• Small Business Notes