35. Board of Directors (definition)

Every corporation – EVERY SINGLE ONE – is required to have something called a “board of directors.” “Board” just basically means a group, and “directors” means corporate directors, so a board of directors is a group of corporate directors. When Ground-Up Governance refers to a “board,” it means “board of directors.” This term is basically guts of Ground-Up Governance. Or maybe the heart or brain? Whichever is most important.

Here’s a super short description of a board: shareholders/members delegate authority to the board to make decisions about how the corporation will operate in the best interests of its stakeholders. And so that’s what the board does! Oh, and the board is the top boss of the corporation, too, which means that part of its job is to decide what everyone else in the corporation does and doesn’t do. Seems simple, but we already know that a lot of those words are pretty complicated, so don’t get too confident yet.

And besides, doesn’t it seem weird that EVERY corporation HAS TO have a board? Even when you first incorporated Reallie Steilish Hats and Accessories & Sons & Associates Corporation (RSHASAC) it was probably for tax reasons (sorry for using that word again). You in fact had NO associates or sons at all, and maybe not even any hats – the name was just aspirational. Even so, you still had a board. You probably decided at the beginning that the board would just be you making decisions in the best interests of the single shareholder (you) about how management (you) will run the corporation (also you). 

Remember that shareholders and members get to vote on stuff? One of the really important things that they vote on is how big the board will be and who will be on it (being “on” a board is another way to say a person is a director). So once a corporation has multiple shareholders it is more likely it will also have multiple directors to help make it more likely that everyone’s interests are taken into consideration. 

An interesting quirk of a board of directors is that – as you’re starting to realize – it has A LOT of authority, but ONLY as a group. Weirdly, individual directors don’t get to make any kind of decision on their own, and each director only gets one vote in the decisions that a board makes as a whole. Why is that weird? It means that a director is the boss of everyone who works in a corporation while simultaneously having no authority at all. 

But why the heck are boards a thing in the first place? Well, the basic idea is that a group of people making decisions is more likely to make GOOD decisions than a single person would on their own, especially when most individuals are more interested in what’s good for themselves than what’s good for anyone else. But more on that later.