eli5: How do corporate Boards of Directors work? What is their function? Do they get a salary? Isn’t there a conflict of interest if a CEO of one company is on the board of another company? Do all companies have them? If not, which companies have them and why?
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(1 & 2) Boards of directors are elected by the shareholders. They exist to oversee the operations of the company, Mainly, they hire the executive officers of the company, delegate authority to those officers so the officers can do the day-to-day running of the company. The board of directors approves significant transactions regarding the company and monitor the company’s operations.
(3) Usually they get a salary.
(4) Sometimes it can be conflict of interest to be on the board of another company. If that happens, then they typically tell the other directors about the conflict and abstain from voting. But, just being on another board isn’t normally a conflict. A conflict can occur when the board needs to approve some sort of transaction where the director is on “Both sides” of the transaction — e.g. the company wants to buy property that a director owns.
(5) Only companies organized as “corporations” have boards of directors. Businesses can be organized in many different ways.
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