You may have heard of the words “shareholders,” or “board directors” in movies and on television but don’t know what they mean to a business. Both are distinct roles with important differences that companies must understand in order to function optimally.
Shareholders own companies collectively and elect a board to oversee their business. They also elect directors who manage their investment interests. The board is legally required to act on shareholders’ behalf and assist companies prosper. Directors may also own shares of the company, but this is not common.
The board of directors establishes policies for overall company oversight as well as management, and meets regularly to discuss and resolve issues. It is a key responsibility of the board be composed of a diverse group of individuals who are skilled, independent and well-qualified to oversee the business operations of the company.
Directors are responsible to make decisions that will benefit the corporation in the long term, hiring managers and corporate executives who handle the day-today operations, as well as communicating company values to employees. They also have the responsibility to ensure the financial health of the business by ensuring that its financials are sound and there aren’t any instances fraud.
Although a shareholder is not able to directly make or amend a decision made by the board, they can express www.boardroomdirect.org/which-virtual-data-room-should-i-get-for-my-organization-and-why their support or raise objections to the decision being made. Directors can also be removed from their positions in the company if they don’t violate their Shareholder Agreement and corporate bylaws.
