Final answer:
Governing boards are considered self-perpetuating when existing members have significant control over the selection of new members, as seen with top executives influencing board composition. For entities like the Federal Reserve, longer terms for Governors provide stability and a non-partisan approach to policy-making.
Step-by-step explanation:
When discussing governing boards being self-perpetuating, this refers to the process by which board members have significant influence over the selection and appointment of new members to the board. In many corporations, top executives play a key role in selecting candidates for the board of directors, which often consist of people who align with their interests or vision for the company.
Specifically, in the context of the Board of Governors of the Federal Reserve, having longer terms in office compared to elected officials such as the President serves to provide a level of stability and continuity in policy-making. This kind of arrangement is crucial to ensure that financial policies are not subject to the swings of politics and can be maintained with a long-term perspective in mind, thus encouraging non-partisan and more technically informed decision-making.
In theory, the board of directors should represent the interests of shareholders, yet the reality is that shareholders often lack the knowledge or incentive to nominate alternative board members, leaving the power concentrated with the current executives and board members.