Directors Powers

Topics: Corporate governance, Types of business entity, Board of directors Pages: 5 (1499 words) Published: March 26, 2013
The directors of an organization are the persons who are members of its board. Several specific terms categorize directors by the presence or absence of their other relationships to the organization.[6] An inside director is a director who is also an employee, officer, major shareholder, or someone similarly connected to the organization. Inside directors represent the interests of the entity's stakeholders, and often have special knowledge of its inner workings, its financial or market position, and so on. Typical inside directors are:

* A Chief Executive Officer (CEO) who may also be Chairman of the Board * Other executives of the organization, such as its Chief Financial Officer (CFO) or Executive Vice President * Large shareholders (who may or may not also be employees or officers) * Representatives of other stakeholders such as labor unions, major lenders, or members of the community in which the organization is located An inside director who is employed as a manager or executive of the organization is sometimes referred to as an executive director (not to be confused with the title executive director sometimes used for the CEO position). Executive directors often have a specified area of responsibility in the organization, such as finance, marketing, human resources, or production. An outside director is a member of the board who is not otherwise employed by or engaged with the organization, and does not represent any of its stakeholders. A typical example is a director who is president of a firm in a different industry. Outside directors bring outside experience and perspective to the board. They keep a watchful eye on the inside directors and on the way the organization is run. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board. They are thought to be advantageous because they can be objective and present little risk of conflict of interest. On the other hand, they might lack familiarity with the specific issues connected to the organization's governance. [edit] Terminology

* director - a person appointed to serve on the board of an organization, such as an institution or business. * inside director - a director who, in addition to serving on the board, has a meaningful connection to the organization * outside director - a director who, other than serving on the board, has no meaningful connections to the organization * executive director - an inside director who is also an executive with the organization. The term is also used, in a completely different sense, to refer to a CEO * non-executive director - a director who is not an executive with the organization * shadow director - an individual who is not a named director but who nevertheless directs or controls the organization Individual directors often serve on more than one board. This practice results in an interlocking directorate, where a relatively small number of individuals have significant influence over a large number of important entities. This situation can have important corporate, social, economic, and legal consequences, and has been the subject of significant research.[citation needed] [edit] Process

The process for running a board, sometimes called the board process, includes the selection of board members, the setting of clear board objectives, the dissemination of documents or board package to the board members, the collaborative creation of an agenda for the meeting, the creation and follow-up of assigned action items, and the assessment of the board process through standardized assessments of board members, owners, and CEOs.[7] The science of this process has been slow to develop due to the secretive nature of the way most companies run their boards, however some standardization is beginning to develop. Some who are pushing for this standardization are the National Association of Corporate Directors, McKinsey Consulting and The...
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