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    Entities As Corporate Directors: Presented By: Nathan Cao

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    nathancao85
    This document discusses allowing entities to serve as corporate directors. It begins by outlining the traditional roles of boards of directors in overseeing management and ensuring shareholder value. However, boards today face problems like director inattention, conflicts of interest, and poor incentivization. The document argues that allowing entities like board service providers, equity groups, or artificial intelligence to serve as directors could help address these issues by providing more expertise, flexibility, accountability, and independence than traditional individuals. Some potential disadvantages are discussed but are argued to be outweighed by the advantages of better governance. Different types of entities may be best suited for different companies depending on their size, growth stage, or industry.

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    Entities As Corporate Directors: Presented By: Nathan Cao

    Uploaded by

    nathancao85
    31 views7 pages
    This document discusses allowing entities to serve as corporate directors. It begins by outlining the traditional roles of boards of directors in overseeing management and ensuring shareholder value. However, boards today face problems like director inattention, conflicts of interest, and poor incentivization. The document argues that allowing entities like board service providers, equity groups, or artificial intelligence to serve as directors could help address these issues by providing more expertise, flexibility, accountability, and independence than traditional individuals. Some potential disadvantages are discussed but are argued to be outweighed by the advantages of better governance. Different types of entities may be best suited for different companies depending on their size, growth stage, or industry.

    Original Description:

    Analysis of entity board idea

    Original Title

    Non-Person Boards Presentation

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    This document discusses allowing entities to serve as corporate directors. It begins by outlining the traditional roles of boards of directors in overseeing management and ensuring shareholder value. However, boards today face problems like director inattention, conflicts of interest, and poor incentivization. The document argues that allowing entities like board service providers, equity groups, or artificial intelligence to serve as directors could help address these issues by providing more expertise, flexibility, accountability, and independence than traditional individuals. Some potential disadvantages are discussed but are argued to be outweighed by the advantages of better governance. Different types of entities may be best suited for different companies depending on their size, growth stage, or industry.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    31 views7 pages

    Entities As Corporate Directors: Presented By: Nathan Cao

    Uploaded by

    nathancao85
    This document discusses allowing entities to serve as corporate directors. It begins by outlining the traditional roles of boards of directors in overseeing management and ensuring shareholder value. However, boards today face problems like director inattention, conflicts of interest, and poor incentivization. The document argues that allowing entities like board service providers, equity groups, or artificial intelligence to serve as directors could help address these issues by providing more expertise, flexibility, accountability, and independence than traditional individuals. Some potential disadvantages are discussed but are argued to be outweighed by the advantages of better governance. Different types of entities may be best suited for different companies depending on their size, growth stage, or industry.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 7

    Entities as Corporate Directors

    Presented By: Nathan Cao

    What Does the Board Do?


    The board of directors serves as the representatives of the shareholders and they assist but also monitor management to ensure that
    they are they are always working to increase shareholder value.

    2
    Management Advisory

    Oversight

    Providing guidance to management


    on key decisions

    Policing management to ensure


    that they are serving the
    shareholders and not engaging in
    any misbehavior

    Not nearly as emphasized today as


    it was in the past

    Much more prominent role today

    2
    Duty of Care

    Duty of Loyalty

    Director must adequately inform


    himself and make necessary
    deliberations before making
    decisions

    Must make decisions in the best


    interests of the corporation and not
    for oneself

    Substantive and procedural

    Violations of this are considered


    much more serious

    Are They Doing These Things Well?


    Boards today have a variety of problems that render them less effective at discharging their responsibilities.

    Director Inattention

    Conflicts of Interest

    Poor Incentivization

    Too much/too little information


    CEOs are often Chairmen of the
    Board

    Compensation not ideal to


    incentive best behavior

    Lack of expertise

    Incentives aligned with managers


    Lack of access to company personnel

    Group decision-making

    Why Have Boards Changed So Little?


    The corporate board has not changed very much in the last 300 years but there is no convincing rationale for why that should be the
    case.

    State Law
    DGCL 141 (b)
    Cal. Corp. Code 164
    N.Y. Bus. Corp. Law 701

    Federal Law
    Heavily implies that directors must be persons
    Ex. 17 C.F.R. 240.10A-3(b)(1)(ii) (2013)

    Listing Requirements
    Mostly follow state law

    What Can Be Changed?


    Allowing entities to become board members would solve many of the problems currently associated with corporate boards.

    One Potential Solution = Entities as Board Members


    Board Service
    Providers

    Better Accountability/Quality
    More reputational
    assets at risk

    Artificial
    Intelligence

    Equity Groups

    More Flexibility

    Less Conflict of Interest

    Variety of expertise

    Directors would be
    truly independent

    More options for


    different businesses

    Eliminates collegiality
    problem

    Full time board


    members
    Higher likelihood of
    liability

    What are the Disadvantages?


    There are a few issues with having entities as board members, but they are clearly outweighed by the advantages.

    Risk Adverse Behavior

    Higher likelihood of massive liability


    may cause too much risk averse
    behavior

    Advantages
    Better Governance

    More Accountability

    New Conflicts of Interest

    There may be conflicts of interest


    during merger situations

    Lack of Management Trust

    Management may not trust board


    members that they are familiar
    with, harming the advisory function

    Disadvantages
    Risk Adverse Behavior
    New Conflicts of Interest

    Less Conflicts of Interest


    Some Loss of Trust

    More Flexibility

    Where Would This Idea Work?


    Allowing entities to be directors would open up a world of options for companies to choose the best type of entity for their current
    situation and stage of growth.

    Board Service Providers

    Wide range of
    expertise available

    Equity Groups

    Artificial Intelligence

    Maximally incentivized
    to govern well
    Ability to analyze huge
    amounts of data

    Greatest
    accountability
    mechanisms

    Well-positioned to
    provide personalized
    mentoring

    Strongest
    independence

    Directors rarely need to


    be compensated for
    their services

    Large Public Corporations

    Growth-Oriented Firms

    Completely
    independent, no chance
    of conflict of interest

    Investment Firms

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