A board of directors is a group of people who jointly supervise the activities of an

organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval England, which has ...

, which can be either a for-profit or a nonprofit organization such as a

business Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a business name A trad ...

nonprofit organization A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that o ...

, or a

government agency A government or state agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an Administratio ...

. The powers, duties, and responsibilities of a board of directors are determined by government

regulations Regulation is the management of complex systems according to a set of rules and trends. In systems theory Systems theory is the interdisciplinary study of system A system is a group of Interaction, interacting or interrelated elements that a ...

(including the jurisdiction's

corporate law Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal pract ...

) and the organization's own

constitution A constitution is an aggregate of fundamental principles A principle is a proposition or value that is a guide for behavior or evaluation. In law, it is a rule Rule or ruling may refer to: Human activity * The exercise of political ...

and

by-lawsA by-law (bye-law, by(e)law, by(e) law) is a rule or law established by an organization or community to regulate itself, as allowed or provided for by some higher authority. The higher authority, generally a legislature or some other government body ...

. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet. In an organization with voting members, the board is accountable to, and may be subordinate to, the organization's full membership, which usually elect the members of the board. In a

stock corporation A joint-stock company is a business entity in which shares of the company's stock Stock (also capital stock) is all of the shares into which ownership of a corporation A corporation is an organization—usually a group of people ...

, non-executive directors are elected by the

shareholder A shareholder (in the United States often referred to as stockholder) of a is an or (such as another , a , a or ) that is registered by the corporation as the legal owner of of the of a or . Shareholders may be referred to as members of a ...

s, and the board has ultimate responsibility for the management of the corporation. In nations with

codeterminationIn corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Governance structures and principles identify the distribution of rights and r ...

(such as

Germany Germany (german: Deutschland, ), officially the Federal Republic of Germany, is a country in . It is the in Europe after , and the most populous . Germany is situated between the and seas to the north, and the to the south; it covers an area of ...

Germany

and

Sweden Sweden ( sv, Sverige ), officially the Kingdom of Sweden ( sv, links=no, Konungariket Sverige ), is a Nordic countries, Nordic country in Northern Europe.The United Nations Group of Experts on Geographical Names states that the country's fo ...

Sweden

), the workers of a corporation elect a set fraction of the board's members. The board of directors appoints the

chief executive officer A chief executive officer (CEO), chief administrator officer, or just chief executive (CE), is one of a number of Corporate Executive, corporate executives in charge of managing an organization especially an independent Legal person, legal entity ...

of the corporation and sets out the overall strategic direction. In corporations with dispersed ownership, the identification and nomination of directors (that shareholders vote for or against) are often done by the board itself, leading to a high degree of self-perpetuation. In a

non-stock corporation A non-stock corporation is a corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law 'born out of statute"; ...

with no general voting membership, the board is the supreme governing body of the institution, and its members are sometimes chosen by the board itself.

Terminology

Other names include board of directors and advisors, board of governors, board of managers,

board of regents In the United States, a board often governs institutions of higher education, including private universities, state universities and community colleges. In each US state, such boards may govern either the state university system, individual coll ...

, board of

trustees Trustee (or the holding of a trusteeship) is a legal term {{Short pages monitor 80% of nonprofit organizations require board members to personally contribute to the organization, as

BoardSource BoardSource, formerly the National Center for Nonprofit Boards, is an American nonprofit A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and ...

recommends. This percentage has increased in recent years.

Criticism

According to John Gillespie, a former investment banker and co-author of a book critical of boards, "Far too much of their time has been for check-the-box and cover-your-behind activities rather than real monitoring of executives and providing strategic advice on behalf of shareholders". At the same time, scholars have found that individual directors have a large effect on major corporate initiatives such as mergers and acquisitions and cross-border investments. The issue of

gender representation on corporate boards of directors Gender representation on corporate boards of directors refers to the proportion of men and women who occupy board member positions. To measure gender diversity on corporate boards, studies often use the percentage of women holding corporate board ...

has been the subject of much criticism in recent years. Governments and corporations have responded with measures such as legislation mandating gender quotas and comply or explain systems to address the disproportionality of gender representation on corporate boards. A study of the French corporate elite has found that certain social classes are also disproportionately represented on boards, with those from the upper and, especially, upper-middle classes tending to dominate.

Notes

References

Citations

Sources

* P. Blumberg, 'Reflections on Proposals for Corporate Reform Through Change in the Composition of the Board of Directors: "Special Interest" or "Public" Directors' (1973) 53 Boston University Law Review 547 * * KJ Hopt,
The German Two-Tier Board: Experience, Theories, Reforms
in KJ Hopt and others. (eds), ''Comparative Corporate Governance: The State of the Art and Emerging Research'' (Clarendon 1998) * KJ Hopt and PC Leyens, 'Board Models in Europe – Recent Developments of Internal Corporate Governance Structures in Germany, the United Kingdom, France, and Italy' (2004
EGCI Working Paper
* * Acre Resources LTD (2018)
The Case for a Social Board
London, UK

External links

NEDonBoard
— UK professional body for non-executive directors & board members
Website of the Board of a large U.S. university, illustrating a typical board's composition, duties, concerns, etc.National Association of Corporate DirectorsInstitute of Directors UKGBAC Global Board Advisors Corp
ref> {{DEFAULTSORT:Board Of Directors Board of directors, Corporate directors, Business law Business terms Corporate law Committees