Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

What is a Board of Governors?

A board of governors refers to a set of individuals who are in charge of managing the effective running of an organization. This group of people supervise the operations and activities of a business or an organization and ensures its mission and goals are achieved. The board of governors is the decision-making body of an organization or institution. Private businesses, public agencies, enterprises, and organizations can have a board of governors. For government institutions or regulatory bodies, the government appoints the board of governors to oversee the activities of the institutions. In schools and colleges, board of governors also exists.

How Does a Board of Governors Work?

Professional organizations, non-profit/non-governmental organizations, academic institutions, and government agencies assign boards of governors. The Federal Reserve of many countries also has board of governors who are individuals that supervise and manage the affairs of the Federal Reserve. The board of governors of Federal reserves is often appointed by the government. In the United States, the President appoints the board of governors which comprises seven individuals, who are professionals that represent the financial, agricultural, industrial, and commercial interests and geographical segments of the country. The appointed individuals are then confirmed by the Senate before they can start their terms. The term duration for the appointed members is 14 years.

Duties of the Federal Reserve Board of Governors

The duties of the Federal Reserve Board of Governors include the following;

• Monitoring, supervising and regulating the activities of the Federal Reserve Banks.
• Ensures that credit protection laws for consumers are upheld.
• Analyzing economic development at the domestic and international levels.
• Time regulation and modification of reserve requirements when necessary.
• Supervision and regulation of banks and the entire financial institution.
• Approval of changes in discount rate initiated by any Federal Reserve Bank

In the United States, there are 12 seats on the Federal Open Market Committee (FOMC) occupied by the seven board of governors while the other five seats are occupied by five out of the 12 regional reserve banks. FOMC is responsible for monetary policy in the United States and oversees the entire monetary policy actions in the country.

Related Topics

• What is the role of the Board of Directors?
• Board of Trustees