Specifically, how can company management be a part of its Board of Directors? Wouldn’t that make a Board’s integrity questionable?
In: Economics
The Board represents the shareholders. So, two things usually happen:
1. In a company, management wants the company to succeed, and the shareholders typically want the company to succeed, so that profits are high. Everybody’s desires and goals basically align.
2. Management can be the biggest shareholders. Depends on how much stock everyone has. Sometimes management is paid in stock options in addition to actual money, so they end up being the biggest shareholders.
In addition, Management is typically specialized (CFO knows a lot about finance, CIO knows a lot about information technology, etc.), and the Board can decide to generally supervise but otherwise trust these individuals to make their specialized decisions for day-to-day operations, to the point where they’re actually members of the Board. It’s more efficient that way.
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