Question

What is the role of a Board of Directors in corporate management, and from where do directors obtain their power to make these decisions? O a. To make sure that bond holders receive no money and that stock holders receive all of the money in a corporation. The Board of directors is inherently corrupt and any bank that lends to a company that has a board of directors will lose money. O b. The Board of Directors (BOD) is made up of the top level management, each called a director, of the corporation. They manage the day-to-day operations of the company. The Chairman of the Board is always the CEO. The power to make these decisions is from employment in the Board itself. O c. To provide oversight and, if necessary, termination of CEOs and other top-level management at corporations. They obtain their authority through ownership of shares which grants voting power to the directors through a process known as proxy. d. Members of Board of Directors are completely and utterly independent of the company. Since all members of the BOD are external the BOD provides monitoring and oversight of the company and it's CEO-- who is always Chairman of the Board.

Answer 1

Correct Answer is "C"

The 'Boards of Directors' of any company might have multiple directors. There are two types of directors:

1. Independent Directors: These are the non executive directors appointed by the company/shareholders. They are not involved in day to day management of the company but provide independent oversight to the company.
2. Non-Independent Directors/Executive Directors: These are the senior management of the company who also have a position on the board.

Explanation for why other options are wrong

• Option A: Board of Directors protect the interests of the company and do not work against the interests of bond holders. They do not corrupt the company. Infact, they the responsibility to ensure the company works in an ethical manner adhering to strict corporate governance standards.
• Option B: A CEO might or might not be the chairman of the board. As specified above, Board of Directors comprise of some independent directors too which are not involved in the day to day management of the company
• Option D: Board of Directors are not completely independent and need not be comprised of all external personnel. CEO is always not the chairman of the board.