Shareholders and the board of directors are both crucial elements of any company’s structure. While they play different duties, they both share the same goal of making sure that the company’s success and sustainable in the long term. Understanding the roles of each and their interrelations is essential to ensuring good corporate governance.
The board of directors is a group of individuals elected by shareholders to oversee the company. They typically meet regularly to create policies for the general supervision and management of the company. They also make short-term decisions including hiring or firing employees, negotiating an agreement with a service provider and making strategic partnerships. The primary www.boardroomdirect.org role of the board is to protect the shareholders’ investment by ensuring that the business is running smoothly and efficiently.
Although there is no legal requirement that directors must be shareholders (indeed the initial directors may be listed on the Certificate of Incorporation or Articles of Agreement, or chosen by the incorporator), the directors must have a significant stake in the company. They can be individuals or corporations. The board can have any number of members but many believe that a maximum of nine members is the best. The authority of the board comes from its bylaws as well as the voting rights associated with shares.
In a company that’s publically traded, it’s possible for anyone to become a shareholder via the purchase of shares. In private companies, where there are shareholder agreements or bylaws in place they have greater control.
