The Role of Directors and Officers

625 Words3 Pages
There are a number of people that are critical to the corporate process. These include the directors of corporations, officers, and shareholders. The primary role of the directors is that of oversight (Loewenstein, 1998). The directors are hired by the shareholders, and their duty is to oversee the actions of the corporate executive. The directors hire the CEO and set his/her salary and benefits. The directors also play a role in oversight of the strategy and operations - this tells them about the merits of the executive that they have hired. Since Sarbanes-Oxley (SOX) was enacted, directors have seen their oversight role expanded (Skinner, 2006). There must be within the director group some financial experience to provide explicit financial oversight of the firm. The law prescribes certain committees as well, including audit and compensation committees, and SOX has also increased the liability that director's face, while expanding the role that directors play in the firm. It should be noted that Sarbanes-Oxley only applies to public companies. For company that are not publicly-traded (closed companies), the provisions of SOX do not apply. There are fundamental differences between closed companies and public companies. The former probably has a board of directors but the role and function of such a board can vary dramatically from firm to firm, something that is not the case with public companies. Closed companies are subject to different standards because there are no
Open Document