Common Shares

Finance a la Shmoop! How does a board of directors function?

All right, well structurally, the Board of Directors has really one function, after

it is elected by a vote, of the common shareholders, of the company. The board of

recruits, then hires the CEO and that's not necessarily easy. Because, most

of the good CEOs, you actually want, are already ensconced in high-paying jobs, [man being offered money]

from which they have to be bought away. Picking the right CEO, is the big

roulette wheel bet, the board makes. Is the CEO good, or bad, or ugly and yeah the

CEO can be all three. After being hired the CEO then hires everyone else, more or

less. In a public company, the board divides into committees, to advise and

oversee many of the little processes. There's audit committee people and

nomination and government committee people and Compensation Committee people.

In large companies there are also, often subcommittees, that focus on narrow

things, like technology, or politics and lobbying and, or the environment. You know, if [oil drill with man and duck]

you work for a big polluter. Well another big element of board value-add, revolves

around, strategy. Are we the high cost, high value company, or are we the low cost,

Walmart desk provider? That is, are we Pirates of the Caribbean, or are we La La

Land? What other strategic issues are we fighting? How do we get into China and [world map]

Russia and get out of Somalia? So yeah, that's strategy. How does the

board cover its primary obligations, in providing a fiduciary duty, to the

shareholders, who elected them? Is the board governing fairly and equitably?

Yeah, how do they do that? Well they just basically pay attention, right? Are

company policies racist, or gender biased, or ageist?

Which is illegal everywhere, except Silicon Valley in Hollywood. Are all the [director and actress]

right controls inspected, like audit, hiring, firing, policies and our

companies casual Fridays, have they gotten to just to casual? Is that a board item?

Yah, alright, next meeting. So yeah, that's the gist, hire the CEO, form

committees and of course they're also in charge of bagel Thursdays. [man in panda suit, bagels falling from sky]