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.


  • 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.


  • 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.


  • 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.

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  • Photo Credit "Business meeting" is Copyrighted by Flickr user: llawliet (Lee Chisholm) under the Creative Commons Attribution license.
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