The Difference Between Shareholders and Board of Directors

You www.boardroomdirect.org might hear the terms «shareholders and board of directors’ in films and TV however, you may not be aware of what these roles actually mean for a company. Both roles have their own distinct characteristics and companies must know them to function optimally.

Shareholders collectively own companies. They select a board of directors to manage their business. They also choose directors to oversee their investment interests. The board is legally required to act on shareholders’ behalf, and help companies prosper. Sometimes directors hold shares in the company. However this is not common.

The board of directors develops policies for overall company oversight and management, and meet regularly to discuss and resolve problems. It is the duty of the board to be composed from a variety of individuals who are competent, independent and highly qualified to oversee the operations of the company.

Directors are responsible for making decisions that will benefit the company in the long term hiring managers, corporate officials who will manage the day-today activities, and communicating the company’s corporate culture to employees. They also have the responsibility to ensure the financial health of the business by ensuring that its finances are in order and that there aren’t any instances fraud.

While shareholders aren’t able to directly make or amend a decision that is made by the board, they are able to declare their approval or raise objections to the decision being made. They can also remove directors from their position in the company, provided they do so without violating their Shareholder Agreement or corporate bylaws.