The board of directors and shareholders are both crucial elements in the structure of any business. While they play different roles, both have the same goal of making sure that the company is successful and sustainable in the long term. Understanding these roles and their interactions is crucial to ensuring good corporate governance.
The board of directors is an organization of people who are chosen by shareholders to oversee the company. They typically meet on a regular basis to decide on policies that govern overall oversight and management. Additionally they make the short-term decisions such as hiring or firing employees, signing an agreement with a service provider, signing best virtual data room is a reliable provider 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.
There is no legal requirement that directors are shareholders (indeed the directors who were initially appointed may be listed on the Certificate of Incorporation or Articles of Association or chosen by the incorporator), the directors must hold a significant stake in the company. They can be either individuals or corporations. The board may have any number of members, however many believe that a maximum of nine members is the ideal number. The authority of the board comes from its bylaws, and the voting rights associated with shares.
Anyone can become a shareholder in an publicly traded company by purchasing stock. In private companies, where there are shareholders’ agreements or bylaws in place they have greater control.