Private Company Board Governance Glossary
Board Governance Fundamentals
Fiduciary Duty
The legal obligation of directors to act in the best interests of the company and its shareholders while exercising appropriate care, loyalty, and good faith.
Duty of Care
A director's responsibility to make informed decisions using reasonable diligence, inquiry, and judgment.
Duty of Loyalty
A director's responsibility to place the interests of the company ahead of personal interests and avoid conflicts of interest.
Duty of Obedience
A director's responsibility to ensure the organization complies with applicable laws, regulations, governing documents, and stated corporate purpose.
Governance
The framework of oversight, accountability, decision-making, and control through which a board directs and supervises an organization.
Governance Oversight
The board's responsibility to monitor strategy, risk, leadership performance, capital allocation, and organizational health without managing day-to-day operations.
Board Independence
The ability of a director to exercise objective judgment free from undue influence, personal interests, or management pressure.
Independent Director
A director who has no material relationship with the company, management team, or significant investors that could impair objective judgment.
Board Roles
Board Chair
The director responsible for leading board meetings, facilitating discussions, setting agendas, and maintaining effective board governance.
Lead Independent Director
An independent director designated to coordinate activities of independent directors and provide additional oversight when the board chair is not independent.
Executive Director
A board member who also serves as an executive of the company.
Non-Executive Director
A director who serves on the board but is not involved in day-to-day management.
Investor Director
A board member appointed by a venture capital firm, private equity firm, family office, or institutional investor.
Founder Director
A founder who continues serving on the board after company formation.
Family Director
A family member serving on the board of a family-owned business.
Board Observer
An individual permitted to attend board meetings but generally not permitted to vote.
Board Observer Rights
Contractual rights allowing an individual or investor representative to attend board meetings and receive board materials without serving as a director.
Board Structure
Board Charter
A governing document outlining board authority, responsibilities, and operating procedures.
Board Resolution
A formal board decision recorded in meeting minutes.
Board Meeting Minutes
The official record of board discussions, decisions, votes, and actions.
Executive Session
A portion of a board meeting conducted without management present.
Quorum
The minimum number of directors required to conduct official board business.
Board Committees
Audit Committee
Responsible for oversight of financial reporting, accounting practices, controls, audits, and financial risk.
Compensation Committee
Oversees executive compensation, incentive plans, and leadership succession.
Nominating and Governance Committee
Responsible for board composition, governance practices, director recruitment, and board evaluations.
Risk Committee
Oversees enterprise risk management and emerging strategic risks.
Transaction Committee
Formed to oversee mergers, acquisitions, divestitures, financing events, or other major transactions.
Special Committee
A temporary committee established to evaluate a specific issue involving potential conflicts or significant strategic decisions.
Financial Oversight Terms
Capital Structure
The combination of debt, equity, and other financing instruments used to fund a company. This is a core concept in your certification curriculum.
Equity
Ownership interest in a company.
Debt
Borrowed capital that must be repaid under specified terms.
Preferred Stock
Equity that carries certain rights and preferences superior to common stock.
Common Stock
Standard ownership shares typically held by founders, employees, and investors.
Liquidation Preference
The order and amount investors receive in a liquidity event before common shareholders receive proceeds.
Dilution
Reduction in ownership percentage resulting from the issuance of additional shares.
Recapitalization
A restructuring of a company's debt and equity mix.
Covenant
A contractual requirement imposed by lenders.
Liquidity
A company's ability to meet short-term financial obligations.
Venture Capital Terms
Term Sheet
A non-binding document outlining key investment terms.
Protective Provisions
Investor rights requiring approval before certain company actions can occur.
Drag-Along Rights
Rights allowing majority shareholders to compel minority shareholders to participate in a sale.
Tag-Along Rights
Rights allowing minority shareholders to participate in a sale initiated by majority shareholders.
Down Round
A financing round completed at a lower valuation than a previous round.
Runway
The amount of time a company can operate before requiring additional capital.
Private Equity Terms
Investment Thesis
The rationale supporting an acquisition and expected value creation plan.
Value Creation Plan
Specific initiatives intended to increase company value during the ownership period.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.
Leverage
Use of debt to finance operations or acquisitions.
Exit Strategy
The planned approach for realizing investment returns through sale, recapitalization, IPO, or other transaction.
Family-Owned Company Terms
Family Constitution
A document outlining family governance principles, expectations, and decision-making processes.
Family Council
A governance body representing family interests separate from the board.
Succession Planning
The process of preparing future leadership and ownership transitions.
Related Party Transaction
A transaction involving family members, directors, executives, or affiliated entities.