Final answer:
The corporation's board of directors is responsible for setting major corporate goals and policies, acting in the interests of shareholders, and is elected by shareholders, not appointed by the SEC or another agency. The influence of top executives on board member selection can impact the effectiveness of governance. The number of members on a board is not legally restricted to a maximum of seven.
Step-by-step explanation:
The question around the role of a corporation's board of directors is pivotal to understanding corporate governance. In theory, the board of directors is there to ensure that a firm is run in the interests of its shareholders. They are neither appointed by the Securities and Exchange Commission (SEC) nor selected by the agency that chartered the corporation. Instead, they are elected by the shareholders to serve as their representatives. While the board may appear to act as organizational figureheads, their responsibilities include setting major corporate goals and policies. Contrary to one of the options provided, there is no legal mandate stipulating that a board should never have more than seven members. The size of the board can vary greatly depending on the company's needs and the requirements set within the company's bylaws.
While shareholders elect the board, it is often observed that the top executives have significant influence in choosing candidates for the board. The complexity and costs associated with nominating alternative board members can deter ordinary shareholders from doing so. This dynamic places considerable power in the hands of top executives, which has led to concerns about the effectiveness of the board as a governing body. The board's efficacy in corporate governance can further be influenced by external factors, such as the quality of audits performed by the auditing firm and the involvement of large outside investors and institutions.