Shareholders and the board of directors are two important elements of any company’s structure. Although they have different roles, both share the same goal: ensuring the company’s success and sustainable 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 regularly to decide on policies that govern general company oversight and management. They also make short-term decisions, such as hiring or firing employees, signing an agreement with a service provider, and the formation of strategic partnerships. The main function of the board is to protect investors’ money by ensuring the company runs smoothly and efficiently.
While there aren’t any legal requirements that the directors must be shareholders (in fact, the first directors could be listed in the Certificate or Articles of Incorporation, or chosen by the incorporator) however, they are required to have a significant interest in the company. They can be individuals or corporations. The board could be composed of any number of people however, most right here people believe that nine members is the ideal number. The power of the board comes from its bylaws and voting rights attached to shares.
If a company is 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 and the shareholders have more control.