What Is a Boardroom?
A boardroom is a room where a group of people conducts meetings, typically those elected by shareholders to manage a company. In the investment banking industry, the boardroom can also refer to a room used in a stock brokerage office to host clients and members of the public. They meet here with registered representatives (RR) to discuss investments, obtain stock quotes, and place trades.
- The primary function of a boardroom is to house meetings of a company’s board of directors, a group of individuals elected to represent shareholders’ interests.
- Board members use the boardroom to discuss and decide how to handle the company’s most pressing issues.
- Boardrooms should contain a big enough table and an adequate number of chairs to seat all those present and be located in a setting that promotes privacy.
- A boardroom can also refer to a room used in a stock brokerage office, where clients and members of the public can meet with registered representatives (RR).
Understanding a Boardroom
As its name implies, the boardroom is best known as a room used by a company’s board of directors (B of D), a group of individuals elected by shareholders to represent them and protect their interests. Board members can generally be divided into three categories.
- Chairman: An individual who heads the board and is responsible for ensuring that it runs smoothly. Elected by the board of directors, a chairman's duties typically include maintaining strong communication with the chief executive officer (CEO) and other high-level executives, formulating the company's business strategy, representing management and the board to the general public and shareholders, and preserving corporate integrity.
- Inside Directors: These board members are either shareholders or high-level managers from within the company, such as the chief operating officer (COO) or the chief financial officer (CFO). Their main tasks include approving high-level budgets prepared by upper management, implementing and monitoring business strategy, and giving the green light to core corporate initiatives and projects.
- Outside Directors: Unlike inside directors, these individuals are not directly part of the management team. They do, however, have the same responsibilities. The role of an outside director is to offer external insights, providing unbiased and impartial perspectives on issues brought to the board.
How a Boardroom Is Used
The frequency of meetings between members of a board of directors varies, depending on the type and size of the company. Usually, gatherings of board members would be expected to occur in a specially designated boardroom at least every business quarter.
During these gatherings, board members will discuss the most pressing issues currently facing the company, and then decide how to handle them, fulfilling their role as a fiduciary on behalf of shareholders.
Issues that fall under a board's purview include the hiring and firing of senior staff, executive compensation, and dividend and options policies. The board is also responsible for helping a corporation set broad goals, supporting executive duties, and ensuring the company has adequate, well-managed resources at its disposal.
Major decisions are made in board meetings, affecting everyone from the people the company employs, the investors that own its shares, and potentially even the greater economy. While these rooms are the locations of very important decision-making processes, the rooms themselves don't necessarily have to be special.
Often, boardrooms are just basic conference rooms. The only real requirement is that they are furnished with chairs and a table big enough to seat all board members.
Another common requirement for these rooms is that they are soundproofed. Privacy is critical during meetings, so it is important that the space used to house them isn’t susceptible to eavesdropping and interruptions.
Though not strictly necessary, many boardrooms are equipped with the latest technological equipment, such as Bloomberg terminals or other state-of-the-art quotation systems. Large-screen televisions and other presentation systems might also be present in the boardroom.