Board of Directors

How does one become a member of the board of directors for a company?

I think I know, technically, they are voted in by proxy (basically notifying the shareholders that this person was chosen to be on the board, if there are no objections, it will be so.)

But HOW did that person get chosen to begin with?

How the board of directors will be chosen is defined in a corporation’s rules or charter. In Australian law, these are called the “memorandum and articles of association”; I think the term used in US law is “articles of incorporation”.

Usually the first board of directors will be specifically named in the ruls or charter, so that they can run the corporation from day 1. After that, usually the shareholders vote on who gets to be on the board, with each shareholder have a number of votes proportional to the number of shares he, she or it holds.

The existing Board of Directors usually has a Nomination Committee (the exact title will vary from corporation to corporation) whose duty is to recommend new board members as existing members retire or resign. The Nomination Committee often makes use of an outside search firm which specializes in identifying credentialed experts in the company’s industry. The candidates nominated must then be elected by the shareholders, but this is usually pretty much a formality. In some cases the bylaws will allow the board to fill vacancies for a period of time (typically until the next annual meeting) without shareholder approval.

[slight quibble]A proxy is someone who acts for someone else. When you see the term proxy used in the context of corporations, it means you are letting another shareholder vote in your place.[/slight quibble]