Definition of Board of Directors: The board of directors comprise the group of company directors charged with organising and managing the running and conduct of a firm.
Executive Directors: An executive director is someone who has a good inside knowledge of the firm and is closely involved in the day to day running of the firm.
Non-Executive Directors: This tend to be independent people from outside the firm. They will not work full time, but offer an outside perspective. Non executive directors are often brought in for specific skills and knowledge. Many ex politicians gain nice jobs as a non executive director
Board of Directors and Shareholders.
In small firms the board of directors are often the shareholders. However with larger firms, there is often a split between the board of directors and the shareholders who own the company. In practice shareholders rarely challenge the decisions of the board of directors. However, with company scandals and mismanagement of funds, shareholders have started to play an active role in safeguarding their investments.
Board of Directors Role
The board of directors have a legal requirement to be honest and act in the bona fide interest of the firm. The Board of directors must also exercise their power for a proper purpose.
Directors should not put themselves into a situation which comprises their role. For example, it would be wrong for a director to get involved with helping a competing firm