Definition of Director

What is a "director" as it applies to corporate finance? What is the role of a director in a company?

Many companies have something called a "Board of Directors".

The "board of directors" are a group of people who are either elected or appointed, and their role is to make important company decisions.

In a publicly traded company, the "board of directors" is elected by company shareholders. The main function of the "board of directors"? To represent the shareholders of the company and to act in their best interests.

One of the important roles that a "board of directors" will take on? Monitoring the performance of the company's CEO. The "board of directors" at a publicly traded company will have the power to terminate an acting CEO if their performance is thought to be lacklustre.

Directors can comprise of company executives (for instance, the CEO is often also the Chairman of the Board), large shareholders or complete outsiders. Outsiders are usually named because they are seen as being experienced and an asset to the Board.

Many activist shareholders will look to replace current members of the Board with people of their own choosing.

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