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Recently Infosys and Tata Sons board room conflict have had made it to headlines. It got us curious as to find out what is Board Of Directors? What are responsibilities of Board of directors? Who is a director? Director of a company carries big responsibility on its shoulders. What if director does a mistake? Would he have to pay from his own pocket or there is some kind of insurance. We came across an interesting infographic about Insurance for Directors.

What is Board of Directors?

A company, though a legal entity in the eyes of law, is an artificial person, existing only in contemplation of law. It has no physical existence. As such, it cannot act in its own person. It can do so only through some human agency. The persons who are in charge of the management of the affairs of a company are termed as directors. They are collectively known as Board
of Directors or the Board.

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization, which can include a non-profit organization or a government agency or corporation. A board of directors’ activities is determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization’s constitution and bylaws. These documents commonly also specify the number of members of the board, how they are to be chosen, and how often they are to meet. The directors of an organization are the persons who are members of its board. 

The institution of the board of directors was based on the premise that a group of trustworthy and respectable people should look after the interests of a large number of shareholders who are not directly involved in the management of the company. The position of the board of directors is that of trust as the board is entrusted with the responsibility to act in the best interests of the company.

Directors take the decision regarding the management of a company collectively in their meetings known as Board Meetings or at the meetings of their committees constituted for certain specific purposes. Typical duties of boards of directors are as follows:

  • Governing the organization by establishing broad policies and setting out strategic objectives;
  • Selecting, appointing, supporting and reviewing the performance of the chief executive (of which the titles vary from organization to organization; the chief executive may be titled Chief Executive Officer, President or Executive Director
  • Terminating the chief executive;
  • ensuring the availability of adequate financial resources;
  • approving annual budgets;
  • accounting to the stakeholders for the organization’s performance;
  • setting the salaries, compensation, and benefits of senior management;
  • The legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates. For companies with publicly trading stock, these responsibilities are typically much more rigorous and complex than for those of other types.

Typically the board chooses one of its members to be the chairman or (also called the “chair” or “chairperson”), who holds whatever title is specified in the bylaws or articles of association. However, in membership organizations, the members elect the president of the organization and the president becomes the chairman of the board unless the bylaws say otherwise.

Insurance for Directors

Following infographic shows the directors and Officer liability insurance.

Insurance for the directors

Insurance for the board of director

Infographic created by SecureNow

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