Understanding Vesting in Corporate Governance

Vestiture is a term used in the context of corporate law and governance. It refers to the process by which a company's board of directors or shareholders vest management powers and responsibilities in a specific individual or group of individuals, typically the CEO or other top executives.

The purpose of vesting is to provide clarity and accountability for the management team, as well as to align their interests with those of the company and its shareholders. By vesting management powers and responsibilities in specific individuals, the company can ensure that there is a clear chain of command and that decisions are made in a timely and effective manner.

There are different types of vesting, including:

1. Time-based vesting: This involves granting management powers and responsibilities to an individual or group over a specified period of time, such as three or five years.
2. Performance-based vesting: This involves tying the vesting of management powers and responsibilities to specific performance metrics or targets, such as revenue growth or profitability.
3. Combination vesting: This involves using a combination of time-based and performance-based vesting to grant management powers and responsibilities.

Overall, vesting is an important aspect of corporate governance and can help ensure that companies are managed effectively and in the best interests of their shareholders.