Corporate Governance Matters, 3rd Edition

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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 34,000 directors of publicly traded corporations. The average director stays on a corporate board for 11 years. Among companies that establish an age limit for serving on a board, the average mandatory ...