Dummy Director
Definition of 'Dummy Director'A person on a company's board of directors who votes and acts on the wishes of a non-board member. Dummy directors are most commonly used when a private company is in the process of going public, and it needs to establish a board of directors with a minimum number of seats to meet regulatory requirements. These temporary directors perform very limited duties. Once suitable directors can be found, the dummy directors resign and the company's shareholders elect real directors.Also known as an accommodation director or nominal director. |
|
Investopedia explains 'Dummy Director'A corporation's directors are legally bound by the prudent person rule, which requires them to each use the same standard of care in their decisions that a rational person in similar circumstances and with a similar background would use. If directors fail to exercise this level of care, they could be found liable for recklessness or gross negligence. For this reason, except in the short-term case of forming a corporation, it is unlikely that someone would be willing to sit on a board as a dummy director in order to execute the wishes of a non-board member. |
Related Definitions
Articles Of Interest
-
Evaluating A Company's Management
Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers! -
Do ETFs have a board of directors?
Yes. An exchange-traded fund (ETF) is a type of security that tracks a basket of assets or an index (such as an index fund), but trades like a stock.Just like any open-end mutual fund, an ETF ... -
What Are Corporate Actions?
Be a savvy investor - learn how corporate actions affect you as a shareholder. -
The Basics Of Corporate Structure
CEOs, CFOs, presidents and vice presidents: learn how to tell the difference. -
Evaluating The Board Of Directors
Corporate structure can tell you a lot about a company's potential. Learn more here. -
Putting Management Under The Microscope
We tell you where to find the telltale signs of corporate misdeeds. -
The Path To Becoming A CEO
Think you have what it takes to be chief executive? Find out what those at the top have in common. -
Wall Street’s Glass Ceiling
It’s tough to boast that there are more female CEOs than ever before when they make up only 4.2% of the total. -
Is Lululemon's Chief Product Officer to Blame For Sheer Debacle?
Lululemon announced April 3 that Chief Product Officer Sheree Waterson was leaving the company as of April 15. Assigning blame might appease the board, but it shouldn't do anything for investors. -
Schulze Plus Joly Equals Success?
Best Buy founder Richard Schulze announced March 25 that he was dropping his bid for the company and rejoining the board as Chairman Emeritus. Two other former board members are rejoining as ...
Free Annual Reports