Inside Director

Categories: Board of Directors

A company's board of directors can seem like a shadowy, amorphous blob. Just a bunch of similar people in similar clothes continuously voting unanimously in favor of world domination.

In real life, though, companies take some pains to assemble their boards. They want different skills and different perspectives, so that the firm has access to a wide range of experience.

Everyone might end up voting unanimously for world domination in the end. But first, individual board members will give some interesting opinions on how that domination should occur.

Inside vs. outside directors are one key distinction companies use to gain different perspectives among their board members. An inside director is an employee of the company, like the CEO or CFO. Someone from inside the company.

In contrast, an outside director comes from...somewhere else. They don't work with the company day-to-day, so they can give an outside perspective.

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Finance: How does a board of directors f...27 Views

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

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

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

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

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

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

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

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

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

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

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nomination and government committee people and Compensation Committee people.

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

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

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

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

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

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

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

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

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

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

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company policies racist, or gender biased, or ageist?

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

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

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

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

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

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