Board of Directors

Who are they?

Central to the functions of a corporation Elected company members who have been delegated, by the shareholders, to oversee the corporation on their behalf. Serve as a governing body within the corporation . Keep the executive on track.

Factors Impacting the effectiveness of Board of Directors

Size of the company. the fairness of the election system. the inclusion of independent members. the profiles of the members. the diversity of expertise that is represented by the board. the commitment that the directors have to monitoring the corporations activities.
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Jobs of the Board

Function as the voice of the shareholders the ownersrepresenting their interests in the corporations events, decisions, and activities. Developing long-term goals for the company. Monitoring and replacing the chief executive officer (CEO). Monitoring and replacing other key members of executive management.
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Jobs of the Board

Reviewing and evaluating compensation plans for executives and directors. Monitoring governance strategies. Detecting incompetence within the board. Selecting and screening board nominees. Communicating with shareholders. Monitoring for conflicts of interest.
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Structure
Needs of each corporation are different. Structure of the board will have to change in order to accommodate new developments within the corporation, such as growth or merger. Size-too small or too large.

Structure
Chairperson-responsible for heading the activities of the board, including governance of corporate operations. In some corporations, the same person serves as chairperson and CEO. CEO- similar to that of the chairperson in that the CEO is the leader of the executive, as the chairperson is the leader of the board. Executive members- high percentage of the directors are also members of the executive threatens board independence.
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Responsibility of Selecting the CEO

careful evaluation of the candidates establishing an effective recruiting strategy strong communication support regarding the change careful evaluation of the new CEO

Evaluating the Candidates

within the companys own management team from that of a close competitor very rare for a CEO to come from an unrelated industry or a non management position. the directors will consider several factors including experience, past performance, personal attributes, leadership skills, reputation, and compatibility with the company.
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Evaluating the Candidates

look for a candidate who will stay with the company for a significant amount of time rather than one who is likely to leave quickly.

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Effective Recruiting
A prospective CEO will evaluate the company in terms of: Its history and reputation The compensation package The relationship of the executive and the board

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Responsibility of Selecting the Executive

The board requests that directors and other trusted parties submit recommendations the board creates short lists

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Legal Obligations
Duty of care Duty of Loyalty Duty not to entrench- prohibits the board from establishing policies and practices that prevent directors from being removed from the board. Duty of supervision

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Independent Outside Directors

balanced mix of members both from within the company and from outside. board remains independent and objective.

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Elections
The election of board members is one of the principal rights and duties of a shareholder. corruption within the board election process. Corruption- shareholders are not provided with adequate opportunity to vote, enough information on the nominees, or the ability to nominate members themselves.

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Nominations
shareholders get the opportunity to vote on incoming directors to the board. Candidates are selected by the board.

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Voting
election of directors generally occurs during annual shareholder meetings. votes are usually weighed on the one share, one vote principle. one person who holds two shares has two votes. two persons each holding one share have one vote each.
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Compensation
members of the board of directors are compensated by the company. Director salary Stock options- company shares Restricted stock- limited trade provisions associated with it. to prevent insider trading
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Compensation
Liability insurance Members of the board of directors do risk legal and financial liability for corporate activities. board members are provided with liability insurance as part of their compensation package.

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Reprisal
shareholders are expected to be able to remove BODs. If they believe that a director is not behaving appropriately or is violating any duties, they are able to petition for the directors dismissal, enact a class action suit, or seek a legal injunction.

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Additional Committees
Audit committee- a necessary establishment under the Sarbanes-Oxley Act and the regulations of the U.S. Securities and Exchange Commission (SEC). ensure that the financial reports released are accurate and representative.

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Additional Committees
Compensation committee- review the compensation practices of the corporation. Nominating committee- serves to establish board membership criteria and nominates directors for election or reelection. Corporate governance committee- for establishing a monitoring policy relating to Corporate Governance.
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