Shareholders and the board of directors are the two most important components of any corporate structure. Both have different roles however they share the same goal to ensure the company’s success and sustainability over the long term. Understanding the roles of each and their interrelations is crucial to good corporate governance.
The board of directors is a collection of people who are chosen by shareholders to supervise the company. They usually meet on a regular basis to create policies for the overall supervision and management of the business. In addition, they take care of the immediate decisions like hiring or firing employees, entering into an agreement with a supplier, signing strategic partnerships and many more. The main role of the board is to protect the investment of shareholders by ensuring that the company is running smoothly and efficiently.
Although there is no legal requirement that directors must be shareholders (indeed, the initial directors are listed in the Certificate of Incorporation, or the Articles of Association or appoint by the incorporator) directors must hold a substantial stake in the company. They could be individuals or corporations. The board may https://boardroomdirect.org/which-virtual-data-room-should-i-get-for-my-organization-and-why/ be composed from any number of members however, most people believe that nine members are the ideal. The board’s authority is derived from its bylaws, as well as the voting rights associated with shares.
If a company is publically traded, it’s possible for anyone to become a shareholder by the purchase of shares. In private companies, if there are shareholders’ agreements or bylaws in place, the shareholders have greater control.