The governing body of a corporation elected by the stockholders. The board is usually composed of officers of the company and outside (non-company) directors. A corporation's board of directors is ultimately responsible for its management. This power is codified in statutes such as Section 141 of the Delaware General Corporation Law and by similar statutes in other states. Although the power to manage the corporation is often broadly stated and not clearly defined, responsibility for making decisions on behalf of the corporation is clearly vested with the directors and not the stockholders. The board discharges this responsibility by:
Appointing officers who run the day-to-day operations of the corporation, propose strategies and objectives and implement corporate plans.
Supervising those officers.
Making major decisions for the corporation (for example, entering into a significant joint venture or putting the business up for sale).
Often selected for their expertise in a particular area or industry connections, directors typically hold an advisory or supervisory role. State statutory law and a corporation's charter normally permit the board to delegate any of its powers to a committee of directors. However, many state statutes restrict the scope of the activities that can be conducted by a committee of less than an entire board.
The board of directors of a corporation owes fiduciary duties to the corporation and its stockholders (see Practice Note, Fiduciary Duties of the Board of Directors (www.practicallaw.com/6-382-1267)). These duties are regulated by:
Statutory law of the state in which the corporation is incorporated.
Common law rules (for example, case law relating to directors' fiduciary duties).
The corporation's articles or certificate of incorporation and by-laws.
The stockholder activist climate. Reform of corporate governance regulations and directors' duties is often influenced by, if not a direct result of, stockholder activism and litigation.
In the case of a public company, the board of directors must also comply with the governance standards of the Securities and Exchange Commission and the exchange on which it lists its stock (see Practice Note, Corporate Governance Standards: Board of Directors (www.practicallaw.com/0-381-5330)).