The board of directors and shareholders are both important elements of the structure of any business. Although they have different roles, both share the same objective of ensuring that the company is successful and sustainable over the long term. Understanding the roles of each and their interrelations is key to good corporate governance.
The board of directors is an organization of people who are chosen by shareholders to supervise the company. They typically meet regularly to https://boardroomdirect.org/advisory-board-guidelines-crucial-points/ decide on policies that govern overall oversight and management. Additionally they handle the short-term decisions like firing or hiring employees, signing an agreement with a supplier, signing strategic partnerships and many more. The primary function of the board is to safeguard shareholders’ investment by ensuring the company runs smoothly and efficiently.
There is no lawful requirement that directors are shareholders (indeed the directors who were initially appointed could be listed in the Certificate of Incorporation or Articles of Association or appoint by the incorporator) directors must have a significant stake in the company. They can be individuals or corporations. The board could be composed of any number of persons, but most believe that nine members are the ideal. The power of the board is derived from its bylaws and voting rights associated with shares.
Anyone can become a shareholder of the public market by buying stock. In private companies, if there are shareholders’ agreements or bylaws that give shareholders greater control.
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