What is a Board of Directors?
Updated: Nov 3, 2022
Public companies are required to have a group of people called the ‘Board of Directors’ who represent the interests of the people who own that company’s stock (and those people who bought the company's stock are known as ‘shareholders’ because by owning the stock, they are ‘holding shares’ of that company.)
Board Members are individuals elected by the shareholders, usually during the company’s annual shareholder meeting.
The Board of Directors has the ultimate responsibility for the governance of the company. The CEO reports to the Board of Directors, so this is an important group of people. The Board is ultimately liable for any actions made by management, and can be sued. How do I know? Because my father put me on the board of his company when I was 18 years old. (TLC was a private company, but still had a Board of Directors.) After his death, the Board was sued by a group of shareholders, who were trying to take control of the company–this was very uncomfortable. The case was ultimately settled out of court, but it certainly gave me perspective on the importance of our responsibility as Board Members.
One tool that we can each put into place for ourselves is having a ‘personal Board of Directors,’ a group of people who are knowledgeable and helpful, who would be willing to advise us in our endeavors. MultiGenerational.Black hasn’t formed our board yet, but we have several advisors who have been instrumental in helping us to move the ball forward. I meet regularly with several of these wonderful people, in groups of two to four or more, and we review actions that the company has taken. I try to have a meeting like this at least monthly. Not necessarily with the same people, but regularly (say, every 2-4 months), with all of them.
Personally, I have had a ‘Board of Directors’ who have come together to advise me, and it is an incredibly powerful tool.
Might you be interested in creating your own ‘Board of Directors’ as you continue to learn about investing? Whom might you ask to be on it? Have you already done something like this? Let me know in the comments! And as always, thanks for reading this.
Step 1 in increasing your financial fluency is HERE.
Step 2 is HERE.
What is Money? is HERE
What is Investing? is HERE
What is The Investing Starter Kit? is HERE
Image from the 1991 TLC Beatrice International Annual Report