Board of Directors

What It Means

A Board of Directors is an elected group of people who supervise a company on behalf of the shareholders. The structure of a Board of Directors is set by a company’s bylaws, which determines such details as the number of members, how the members are elected, and how often the group meets.

Why It’s Important

A Board of Directors, when properly formed, can provide a very important level of oversight on a company and ensure that executive decision-making is aligned with shareholder interests. A well structured board will represent a diversity of perspectives, including inside directors (e.g. the CEO or representatives of key investors) and outside investors (e.g. industry experts). A Board of Directors has the power to substantially influence a company for better or worse. A strong and aligned board can open new doors and propel a company to new heights. On the other hand, a weak or dysfunctional board can hold a company back or worse.

If a Seller decides to rollover or retain equity in a company after an Acquisition, the Seller should seek a position on the Board of Directors. After all, the Seller has years of direct experience and expertise that could prove invaluable. However, the Seller needs to understand that the Buyer may not run the business the same way and may make different decisions regarding strategy and management.

Related Terms

Return to List of Terms

Articles

Follow the Money: Sources of Capital Used to Buy a Business

In this article, we will explore some of the more common sources of funding used to purchase a business, along with a few brief but important considerations for both buyers and sellers.

[Updated] Should the election results affect when you sell your business?

[Updated 2023] Governmental control changes hands every few years here in the US, but should shifts in the political winds affect the timing of a sale? The democratic party party seized control of the white house and won a narrow majority in both legislative houses in the 2020 election. We’ll explore a few ways that the election results might affect business owners contemplating an exit, for better and for worse.

What is an “add-back” expense anyway?

Expense add-backs are a common adjustment made to the P&L of companies that are positioned for sale. They are intended to represent expenses that would not have affected the company under different management. Legitimate add-backs can provide a significant boost to a company’s valuation.

5 ways the COVID-19 pandemic might affect the sale of your business

The COVID-19 pandemic has proven to be boom or bust for many businesses. In this article, we’ll explore 5 ways that the resulting economic climate is likely to affect the sale of a business, for better or worse.

Should you hire a business broker to sell your business?

Explore some key questions to ask when considering whether it makes sense to hire a business broker to sell your business.

Board of Directors

What It Means

Why It’s Important

Related Terms

Related Posts