A corporate _____ that is relatively passive performs a general oversight function without getting actively involved in how the company is run.

Answer 1

A corporate board of directors that is relatively passive performs a general oversight function without getting actively involved in how the company is run. Generally, a passive board of directors is more reactive than proactive in managing company risks, threats, and conflicts of interest. A conflict of interest may occur if an individual uses their authority or capacity (specifically in a business position) for their own self-interest, and not in the best interest of the company or unit for which they are responsible. A corporate board of directors (BOD for a corporation) are elected by the shareholders who have equity in the company, and the members of the board have a responsibility to play an active role in governing the decisions that have a major impact on the business. One example of a passive board of directors may be a board that is over-trusting of the company's CEO. If the board relies too heavily on the decisions and perspective of the CEO without actively participating in the overall management of a company, then they could be considered too passive and shareholders (and investors) may perceive this as relatively negative.