But then the question that arises is what are the agency problems solved by them and why are boards of directors the solution to these problems? The agency problem in any business is between management and shareholders. And the problem arises because of the lack of shareholder control over management and the possibility of management deceiving shareholders. The possible solution to this problem is to either incentivize management or strengthen the position of shareholders to tackle the problem themselves. But then the question arises: who provides the incentives to management and how shareholders are empowered. Thus, the board of directors can be seen as a bridge or intermediary, as the literature suggests, between management and shareholders, which maintains trust between them by monitoring management and taking action, on behalf of shareholders , to optimize the profit value. of the company.How is the board of directors structured?Typically, the board of directors is divided into two groups: inside directors and outside directors. An inside director is a director who is a full-time employee of the company, while a director employed outside of the company in question is called an outside director. Outside directors are considered more independent than inside directors, because the latter appear to have more ties to the CEO. The independence of a board of directors depends on the interplay between the CEO and the board of directors: the CEO wants a less independent board of directors and thus tries to reduce the number of outside directors and the board of directors , conversely, tries to remain independent. What do administrators do? Mace's main findings were that "trustees serve as a source of advice and guidance, serve as a medium of document...which is a legal requirement." It is therefore very important to understand the role of the board of directors and its functions. Boards of directors are difficult institutions to study, not only because of their endogenous nature but also because of the lack of theoretical structure. The empirical study of boards of directors is difficult due to the different variables involved in the study and the ambiguity that arises in the case of certain classifications: who is considered an independent director? The important questions regarding the board of directors are what determines its composition and what determines its actions. Board independence may not be relevant on a day-to-day basis, but it is very important when certain actions are taken. It is also important to consider the size of the board of directors in order not only to maintain the independence of the board, but also to avoid problems of free riding between directors..