Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences

4. Board of Directors: Selection, Compensation, and Removal

In this chapter, we examine how companies select, compensate, and remove board members. We start by examining the size of the market for directors and the qualifications of board members. Next, we discuss how companies identify gaps in the board’s capabilities and recruit individuals to fill those gaps. We then evaluate director compensation and equity ownership guidelines. Finally, we consider the resignation and removal of directors.

Market for Directors

The United States has approximately 50,000 directors of large private and publicly traded corporations (see Table 4.1). The average director stays on a corporate board for seven years. Among companies that establish an age limit for ...