Board of Directors Responsibility

The board of directors has the highest governing power within the management structure of any company.

Their job is to select, evaluate and approve fitting compensation for the chief executive officer of the company.

He is also responsible for evaluating the attractiveness and pay dividends, recommend stock splits, see through the company’s financial statements, and to decide on either recommending or discouraging acquisitions and mergers. It is the board of director’s responsibility to primarily protect the shareholders’ assets and to make sure that these people receive a decent return of their investments and not the opposite sentiment of protecting the company and its employees first.

The board of directors could be made up of men and women who have been elected by the company’s shareholders for multiple-year terms. There are companies that follow a rotating system so only a few of the directors are up for election each year. It is even much harder to opt for a complete board change to take place because of hostile takeover. Often, the characteristics of directors are that they a) have a vested interest in the company; b) they occupy a higher place in the company or c) they are not affiliated with the company but are well known for their business abilities. The number of editors for each company may not be fixed and thus may vary. Some companies may opt to have 12, 8 or any number of boards of directors. In some countries like the United States, at least fifty percent of the directors should be able to meet certain requirements like requirements of “independence” which means that they are not affiliated by other companies.

Responsibilities of the board of directors include establishing an audit and compensation committees. The audit committee is in charge of ensuring the accuracy of the company’s financial statements and reports. The audit committee should use a fair and reasonable estimate. The board members are the one to choose, hire and work with the chosen auditing firm which actually makes the auditing possible. The compensation committee on the other hand sets base compensation, stock option awards and bonuses for the executives in the company even like the chief executive officer. Up to date, the board of directors has faced difficulties for allowing executive salaries to rise on unjustifiably ridiculous levels.

As payment for their services, the corporate directors are paid with a yearly salary, compensation for every meeting they have gone through, and other benefits. Directorship fees vary from company to company where other companies could pay as much as $46500 as their annual retainer, $2500 as an additional annual retainer.

The effectiveness of the board of directors largely depends on the ownership of a corporation. In companies run by a single shareholder, the individual investor can efficiently control the company. The problems of the board of directors are appealed through the controlling shareholder. In other companies where there is no controlling shareholder that exists, the directors would still have to act as if a person did exist.


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