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.

BREAKING DOWN '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 TERMS
  1. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  2. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  3. Executive Director

    The senior operating officer or manager of an organization or ...
  4. Business Judgment Rule

    A regulation that helps to make sure a corporation's board of ...
  5. Dummy Shareholder

    An entity that holds shares in a public company on behalf of ...
  6. Directors And Officers Liability ...

    Directors and officers liability insurance covers you if you're ...
Related Articles
  1. Investing

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  2. Entrepreneurship & Small Business

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  3. Investing

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  4. Investing

    Governance Pays

    Learn about how the way a company keeps its management in check can affect the bottom line.
  5. Managing Wealth

    What CEOs Actually Do

    CEOs are responsible for the overall operation of a business, and are usually elected by shareholders and the board of directors.
  6. Managing Wealth

    3 Reasons To Separate CEO And Chairman Positions

    Separating these high-profile positions can help to strengthen the overall integrity of a company.
  7. Investing

    Fundamental Analysis: Qualitative Factors - The Company

    By Ben McClureBefore diving into a company's financial statements, we're going to take a look at some of the qualitative aspects of a company. Fundamental analysis seeks to determine the intrinsic ...
  8. Markets

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  9. Investing

    The Path to Become a Managing Director in an Investment Bank

    Find out what it takes to become managing director at a major investment bank, starting from business school and surviving all of the titles in between.
  10. Markets

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
RELATED FAQS
  1. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  2. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ... Read Answer >>
  3. There is no obligation to pay out dividends even for those firms that have traditionally ...

    Could you please explain this? "Some companies pay out dividends, but many others do not. And there is no obligation ... Read Answer >>
  4. When a corporation wishes to open a margin account with a broker-dealer ...

    The correct answer is b. Whenever a corporation opens an account with a broker-dealer, a resolution by the board of directors, ... Read Answer >>
  5. If I own a stock in a company, do I get a say in the company's operations?

    You don't get a direct say in a company's day-to-day operations, but, depending on whether you own voting or non-voting stock, ... Read Answer >>
  6. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center