When and why does a company require a board of directors? How come it can sometimes overrule or even push out the owner?
In: Economics
A board of directors is usually found at a public company. The board is elected by the shareholders (the owners) to run the company on their behalf and look out for their interests. Usually, the board then hires the executives who actually run the company per the board’s instructions.
The board works for the owners. However, in lots of cases, “the owner” is one of the original owners from before the company went public and they still own a lot of shares. But if they don’t own a majority (very common with large public companies) then the other owners (the rest of the shareholders) have enough votes to push a particular person *off the board* or *out of working at the company*.
And since the board represents the *majority* of the shareholders, minority owners may not always get their way. If the majority of shareholders decide to sell the company, then the minority can be “forced out”. They will still get whatever they’re due from the sale but they may not be able to stop the sale.
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