Board seat

Definition

A voting place on the board that governs the company you bought.

Why It Matters

An observer watches and a director decides, and the gap between them is the whole of it: directors hire and fire the chief executive, approve the budget and the debt, and carry duties to the company that an observer does not. So the number of seats and who fills them is a control question, negotiated alongside the money and hard to reopen afterwards. Count the votes, not the people, and ask what needs board approval before you sign, because a short list of reserved matters can hand back most of what the seat count gave you.

In numbers: On a five-seat board where investors hold three, a 60% bloc can replace you without a single other vote.