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What is a board of directors that is a question less than one percent of the us population can answer properly what’s a board of directors who is a consist of what’s their job how much do they get paid all those types of questions i’m gonna answer those today so you guys can know what a board of directors is hello subscribers thank you so much for joining me today
On the financial education channel so today i’m going to explain what a board of directors is a board of directors may be 1% of the population out there really understands what a board of directors is what the responsibilities are hmm can get on a board of directors all those kinds of things i’m gonna explain to you guys the whole board of directors situation
Today so i made an illustration i decided to write it down beforehand because it’s hard to record and write and do all that stuff at the same time so my illustration you have a board of directors now first off most companies don’t have board of directors because they’re small companies right but huge companies multi-billion dollar companies public companies they
All have a board of directors that have between about five and ten people on it who decide things and i’m gonna explain that to you so they’re made up of one the ceo is almost on in all companies they’re always on the board of directors so the chief executive officer the almighty person in charge of the company they’re almost always on the board of directors and
The rest are usually independent people meaning their ceos or cfo’s of other companies that are huge companies and the reason they’re independent is so the people that are in charge of making decisions strategic decisions what the company aren’t also the people that are picking out whoever goes on the campaign they’re made of a bunch of independent people now they
Choose few executives the board of directors does the board of directors chooses future executives who will be the next ceo who will be the next cfo ceo all the very very most important executive decisions are made by the board of directors that’s who makes it and remember the only one person really on the board of directors is an executive themselves so the rest
Of the people on that board who are making those decisions that are made up of independent people they also choose things like executive compensation how much the executives will get paid how much in stock options all those kind of things they also make those type of big decisions but the board of directors does not make strategic decisions like say the board of
Directors at apple they don’t decide whether the next iphone is going to be 10 inches or 5 inches or things like that that’s what the executive team decides on but not the board of directors the board of directors they’re only going to pick out who the next executives are executive compensation those kinds of things and how you get on the board of directors is you
Have to get enough votes from the shareholders at the shareholder meeting that’s who decides who the board of directors is the shareholders are the ones that vote and if you get enough shareholders to vote for you you can be on the board of directors of that company board members of big companies usually make 100k to 250 thousand dollars per year and they only have
A few meetings per year it’s a really cake job and it’s a very easy way to make 100 250 k a year if you have a ton of experience and you’ve been an executive audit huge companies before in the past that’s how you can get on the board so they want to stay on the board because they like making a lot of money very easy just for a few meetings a year their incentive
Is for the stock price to go up that’s one of their incentives the other ones or the revenue goes up profits go up if those three things happen stocks going up revenues going up profits going up the more likely the shareholders will continue to vote for the board members to stay on the board of directors now if those things are going down the share price going
Down the revenue the profits all this stuff’s going down the shareholders probably aren’t gonna vote for that same board of directors they’re gonna want a new blood in there they’re gonna choose new people that way the new board of directors can vote for new ceos cfos better people to run the company because obviously they wouldn’t be doing that good of a job if
Everything’s going downward and this last part they will keep getting voted that i’d basically just explained that they’re gonna keep getting voted on the board of directors as long as the company’s being run very good so that’s what a board of directors is i hope that explained it very simply and very easily to you guys today so now you can be one of the 1% of the
Population or half a percent of the population that really understands a board of directors because i guarantee you if you went and walked on the street and asked people what a board of directors is they would have very little to even give you for information or they’d be completely wrong and that’s like over 99% of americans so now you guys know what a board of
Directors is subscribers thank you so much for watching this video if you have not subscribed yet you may want to we talked a lot about business related subjects financial markets and those types of subjects and personal finance on fridays personal finance fridays you never want to miss that thanks for watching guys have a great day
Transcribed from video
What is a Board of Directors By Financial Education