A board of directors is a group of individuals elected by shareholders to provide oversight, guidance, and make critical decisions on behalf of the company, including setting its strategic direction and appointing its executives.
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Last Updated: February 6, 2026
In the business world, the term “board of directors” gets thrown around a lot. But what exactly is a board of directors? What does a board do? This article will walk through all the essential facts about a board of directors and its role in a corporation.
The board of directors is a group that oversees and makes important decisions about a corporation’s activities. The chairman of the board is a bit like the board’s president. They preside over the board, lead meetings, and perform other essential company functions.
Shareholders elect the board of directors. Shareholders can also nominate candidates for the board of directors.
People who sit on the board can be referred to by a few different names. They can be called members, board members, and directors. The “board” is a shorter name for the board of directors.
Who can serve on the board of directors is dictated by a few different factors, but state laws and the company bylaws have the biggest impact. Often, state law requires a director to be at least 18 years of age, and then the company owners can set other standards for the remaining qualifications. Many business owners opt to choose directors whom they trust and who have prestigious qualifications in the company’s industry.
Members of the board of directors don’t have to work for the company. In fact, having outside members sitting on the board of directors benefits the company. The reason? Independent members don’t have a direct stake in the business decision, so they’re less likely to be biased. However, having outside members on the board of directors disadvantages the corporation if they aren’t familiar with the corporation, its workings, and its history.
The board of directors has a range of management responsibilities, including:
The board of directors may have additional responsibilities. The corporation’s bylaws and formation documents (e.g., articles of incorporation) set up the board’s responsibilities. When carrying out these responsibilities, the board of directors has ethical obligations.
Members of the board of directors have ethical obligations (called fiduciary duties) they must follow. The reason? They are in a position of trust in the corporation. By electing board members, the shareholders trust the board of directors to manage the corporation and maximize the shareholder’s return on their investments.
The board of directors owes these fiduciary duties to the shareholders and corporation:
Some states (like Delaware) allow a business owner to expand, limit, or even eliminate some of these fiduciary duties. It’s important not to make this decision lightly, though. Not having these in place can open up a corporation to liability.
ZenBusiness’s Business Plan Template can help business owners hammer out details about their company, such as these fiduciary duties.
No, not every business has a board of directors. Only corporations (like an S Corp or C Corp) have a board of directors. Other business entities, such as a limited liability company, have different management structures; for an LLC, the company’s managers or members take on the board of directors’ role. State law provides default rules for:
Depending on which state an entrepreneur forms their corporation in, they may be able to modify these default rules to better suit their company’s situation.
The definition of the board of directors is a group of people who direct and control a company. The board provides advantages for companies because businesses need structured guidance to flourish. Directors usually have many responsibilities and ethical obligations to the company.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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