Board of directors

Board of directors is a group of individuals that are elected as representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Such issues include the hiring of executives, dividend policies, options policies and executive compensation. Every public company must have a board of directors.

The board of directors is body that makes decisions on shareholders behalf. Most importantly, the board of directors should be a fair representation of both management and shareholders interests. Too many insiders serving as directors will mean that the board will tend to make decisions more beneficial to management. On the other hand, possessing too many independent directors may mean management will be left out of the decision-making process and may cause good managers to leave in frustration.