5. Board of Directors and Committees
f. describe functions and responsibilities of a company's board of directors and its committees;
What is the difference between executive managers and non-executive directors?
- Executive (internal) directors are employed by the company and are typically members of senior management.
- Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role.
What is a classified or staggered board? What are the pros and cons?
Staggered directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value.
What are the two primary responsibilities of a board?
- Duty of care
- Duty of loyalty
Who hires the CEO?
What are common board of directors committees?
- Audit committee - ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely
- Governance committee - ensure that the company adopts good corporate governance practices
- Remuneration (compensation) committee - develops and implements executive compensation policies
- Nomination committee - searches for and nominates board director candidates