Description
Corporate governance is well described in a 50-minute YouTube lecture delivered at Carnegie-Mellon University (suggest you start at about 5:00 min in) that traces the transition…
- from an owner-run enterprise (example: a pizza shop) in which the owner not only legally owns the business but fully does/directs the work;
- to an owner-controlled business that has grown with investment (perhaps from venture capitalists), so investors have a share in the ownership and are represented (at least nominally) by a board of directors. The original owner heavily influences the board, and remains more involved in the work than any other owners;
- to one that with still more capital (via public offering) takes on even more owners, who are even less involved in the work, but whose interests are therefore more dependent on their representatives on the board. So the board is more in control;
- to one with many employees, led by a CEO who is no longer the original owner but is responsible to see to it that the business succeeds. The CEO is answerable to a board whose responsibility is to protect the interests of the (even more remote) owners.
If you have less time, take a look at this <3-minute presentation from the Business Roundtable.
Those to whom the board answers
Corporate boards have a legally defined ownership to which they must answer because they have invested in the corporation and therefore have purchased legal ownership.
Those whose interests are served
The entity served by a corporate board is (hopefully) growing due to efforts of the corporation to increase its customer base.
Overlapping Roles
Corporate boards often envision an expanded definition of ‘ownership’ to include those who are potential investors, and even those customers with increased loyalty to the brand and therefore feel (varying depending on the customer experience) a sense of ownership.