Definition & Meaning:

In a large company how can the owners/shareholders make sure that the company is being run well? Most shareholders aren't involved in the day-to-day running of a company and the people who actually run the company (e.g. the CEO, managers etc...) may not have the same interest as them (that the share price increases and dividends are large etc...).

So to look after their interests in the company, the owners/shareholders elected/employ a group of people. This group of people is called the 'board of directors'. Their role is not only to make sure that the company is being run well, but to make decisions about the general direction the company is going in and the business strategies it uses. All of which are in the best interest of the owners/shareholders.

For public corporations/public limited companies, the members of the 'board of directors' is elected annually by the shareholders at the company's 'Annual General Meeting (AGM)'.

The board of directors aren't actually involved in the actual day-to-day running of the company (they have a 'non-executive' role) but supervise, review, make decisions and give instructions to those who actually do (e.g. the chief executive officer/managing director). In fact, for most companies the board of directors meet for less than 10 days each year.

The person in charge of the board of directors is called the 'chairman' or 'president'.

Also Called:

The Board.

Related Vocabulary:

Common Stock, Dividend.

To learn more about other positions in the corporate hierarchy, you can do a free online exercise on Corporate/Business job hierarchy vocabulary.