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Director FAQ: Director Independence

In brief:Directors are fiduciaries on behalf of the corporation and its owners (or, in a nonprofit organization, its beneficiaries). As fiduciaries, they must be free from conflicts of interest when theymake decisions, recusing themselves if they have a conflict. In some situations, however, avoidin...

Samples and Templates, Research | January 23, 2017

Director FAQ: Board Leadership Structure: Split Versus Combined CEO/Chair

In brief:The debate over which board leadership structure is optimal—an independent chair or a combined CEO/chair with a lead independent director—has no clear resolution. NACD supports the position that either board leadership structure can work. How the structure is enacted likely has ...

Samples and Templates, Research | December 16, 2016

Director FAQ: Director Independence on Family Business Boards

In brief:Family businesses traditionally tend to favor boards composed entirely of family members and, therefore, company insiders. However, independent directors can be a valuable addition to the board of a family company due to their professional expertise and ability to offer fresh and objective ...

Samples and Templates, Research | April 7, 2017

Director FAQ: Executive Sessions

In brief:One of the hallmarks of a board’s independence from management is the practice of holding regular sessions of independent board members without management participation. These are called “executive sessions,” although their main purpose is to enable directors who arenotcom...

Samples and Templates, Research | March 14, 2017

Director FAQ: Setting the Board Agenda

In brief:The 2016Report of the NACD Blue Ribbon Commission on Building the Strategic-Asset Boardconfirms that boards are now operating in a more complex environment due to new regulatory requirements, growing demands from investors, and digital disruption, among other reasons. Increased responsibili...

Samples and Templates, Research | March 3, 2017

Director FAQ: Subsidiary Governance

In brief:Every incorporated entity must have a board of directors. However, when the entity is a subsidiary of a parent company with a board, the subsidiary may either have its own board or be governed by the parent board. This installment of NACD’sDirector FAQseries explores three common scen...

Samples and Templates, Research | November 21, 2016

Director FAQ: Fiduciary Duties

In brief: Corporate directors are fiduciaries with duties of care and loyalty to the corporation. Directors who fulfill these duties are less likely to be sued successfully for decisions that have poor outcomes,thanks to a legal doctrine known as the business judgment rule. Standards for fulfilling ...

Samples and Templates, Research | May 5, 2017

Director FAQ: Oversight of the Independent Auditor

In brief:Boards rely on independent auditors to give an unbiased opinion on the company’s financial statements. The audit committee plays a key role in ensuring the quality of work done by the independent auditor, especially in public companies. This Director FAQ provides a general overview of...

Samples and Templates, Research | August 25, 2017

Director FAQ: The Role of Proxy Advisory Firms

In brief:The proxy advisory firm industry has grown substantially over the last three decades, and their increasing influence over corporate-governance matters and sharehold­er votes has become highly controversial. ThisDirector FAQexplains the growth of the proxy advisory firm industry, the ma...

Samples and Templates, Research | October 12, 2017

Director FAQ: The Role of the Executive Chair

In brief:For the purposes of this memo, NACD defines the executive chair role as a temporary position fulfilled by the former combined CEO/chair who has relinquished the CEO title while remaining board chair and onboarding an incoming CEO. Creating this role is not standard practice for a CEO transi...

Samples and Templates, Research | July 27, 2017