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Corporate Governance
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Boards are often comprised of inside and independent members. Insiders are major shareholders,
founders and executives. Independent directors do not share the ties of the insiders, but they are
chosen because of their experience managing or directing other large companies. Independents are
considered helpful for governance, because they dilute the concentration of power and help align
shareholder interest with those of the insiders.
Good corporate governance creates a transparent set of rules and controls in which shareholders,
directors and officers have aligned incentives. Most companies strive to have a high level of
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corporate governance. For many shareholders, it is not enough for a company to merely be
profitable; it also needs to demonstrate good corporate citizenship through environmental
awareness, ethical behavior and sound corporate governance practices.
Board Of Directors - B Of D
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Corporate Governance
Board Of Directors - B Of D
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Inside Director
A board of directors (B of D) is a group of individuals that are elected as, or elected to act as,
representatives of the stockholders to establish corporate management related policies and to make
decisions oResolution
Corporate n major company issues. Ever y public company must have a board of directors. Some
private and nonprofit companies have a board of directors as well.
Shareholder
BREA KING DOW N 'Board Of Directors - B Of D'
In general, the board makes decisions on shareholders behalf as a fiduciar y and looks out for the
financial wellbCorporate
Market-Based eing of theGovernance
company. Su...ch issues that fall under a board's pur view include the hiring
and firing of executives, dividend policies, options policies, and executive compensation. In addition
to those duties, a board of directors is responsible for helping a corporation set broad goals, support
Corporate Accountability
executives in their duties, while also ensuring the company has adequate resources at its disposal
and that those resources are managed well.
Voting Right
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Stakeholder
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Inside Director
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A board member who is an employee, officer or stakeholder in the company. Inside directors - and
outside directors, for that matter - have a fiduciary duty to the company of which board they sit on,
and are expected to always act in the best interests of the company. Because of their specialized
knowledge about the inner workings of the company, a strong board of inside directors is a key
element in its success.
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An institutional investor who is considering making a sizable investment in a company will
oftfteen insist on appointing one or more of the investor's representatives to the company's board
of directors as a condition of such investment.
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