Board of Directors

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Board of Directors

A group of people comprising the governing body of a corporation.

The shareholders of a corporation hold an election to choose people who have been nominated to direct or manage the corporation as a board. In the past nearly all states required that at least three directors run a corporation. The laws have changed, however, since many corporations have only one or two shareholders and therefore require only one or two directors to serve on the board.

Directors are elected at the first annual meeting of shareholders and at each successive annual meeting for one-year terms, unless they are divided into classes. In a corporation that divides its directors into classes, called a classified board, conditions are often imposed concerning the minimum size of the board, the minimum number of directors to be elected annually, and the maximum number of classes or maximum terms. The purpose of a classified board, which is expressly permitted by most statutes, is to make takeover attempts more difficult by staggering the terms of the directors.

Removal of a director during the course of his or her term may occur for cause by shareholders or by the board itself if there is a provision in the bylaws or articles of incorporation that confers such power upon them. The removal of a director for cause is reviewable by a court. Many jurisdictions have put into effect statutes that concern the removal of directors with or without cause.

The functions of directors involve a fiduciary duty to the corporation. Directors are in control of others' property and their powers are derived primarily from statute.

Directors are responsible for determining and executing corporate policy. For example, they make decisions regarding supervision of the entire enterprise and regarding products and services.

Liabilities of directors extend to both their individual and joint actions. A director who commits a tort against his or her corporation can be held personally liable.

Directors are bound by certain duties such as the duty to act within the scope of their authority and to exercise due care in the performance of their corporate tasks.

board of directors

n. the policy managers of a corporation or organization elected by the shareholders or members. The Board in turn chooses the officers of the corporation, sets basic policy, and is responsible to the shareholders. In small corporations there are usually only three directors. In larger corporations board members provide illustrious names, but the company is often run by the officers and middle-management who have the expertise. (See: corporation)

References in periodicals archive ?
For example many boards of directors have a finance committee, which exercises general oversight over the company's financial programs.
The search side of ACMS enables companies and organizations searching for an audit committee candidate to explore whether there might be a CPA candidate who meets the needs of its boards of directors. The search process will be offered as a public service to organizations, at least for the foreseeable future.
The taxpayers contended that this provision should be disregarded on the grounds that it was similar to (and as innocuous as) the restrictions placed on boards of directors by debt instruments or preferred stock.
The survey also requested information on boards of directors and consumers demographics, in addition to the disability types of persons receiving services.
The survey results indicate that more than two-thirds of both boards of directors and senior management staff consider risk management to be an important responsibility.
"Requiring independence is key to the success of the audit committee's function," says Charles Elson, a University of Delaware law professor in Newark, Delaware, who currently serves on the boards of directors and audit committees of several Fortune 500 companies, including Sunbeam and AutoZone.
On December 13, 2001, the Federal Reserve Board approved actions by the boards of directors of the Federal Reserve Banks of Cleveland, Richmond, Atlanta, Minneapolis, Kansas City, and Dallas, decreasing the discount rate at the banks from 1 1/2 percent to 1 1/4 percent, effective immediately.
The Federal Reserve Board approved on November 7, 2001, actions by the boards of directors of the Federal Reserve Banks of Philadelphia, Chicago, and Minneapolis, decreasing the discount rate at the banks from 2 percent to 1 1/2 percent, effective immediately.
It is always good to strengthen the independence of boards of directors. However, I am concerned that an adversarial situation could be created by saying that the auditor's client is the board of directors.
Three core issues were researched and debated: the separation of the CEO and chairperson positions; the roles and responsibilities of boards of directors in driving corporate culture; and multiple stakeholder valuation.
In taking the discount rate action, the Federal Reserve Board also approved the discount rate requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Cleveland, Richmond, Atlanta, Chicago, St.
While compliance may be good enough to earn an unqualified opinion from the auditor, it is not necessarily the best result for the users of those financial reports or for the boards of directors in meeting their corporate governance responsibilities.