Shareholders and the board of directors are two crucial elements of any company’s structure. Although they each have their own duties, they both share the same objective www.boardroomdirect.org/what-does-it-mean-to-be-a-shareholder-in-a-private-company of ensuring that the company is successful and sustainable over the long term. Understanding these roles and their interactions is essential to ensuring good corporate governance.
The board of directors is a group composed of people elected by shareholders to oversee the company. Usually, they meet on a regular basis to set up policies for overall company oversight and management. Additionally they handle the immediate decisions, such as hiring or firing employees, entering into an agreement with a service provider, signing strategic partnerships and more. The main function of the board is to safeguard the shareholders’ investment by ensuring that the company is operating smoothly and efficiently.
While there are no legal requirements that directors be shareholders (in fact, the directors who are initially appointed may be listed in the Certificate or Articles of Incorporation or be selected by the incorporator) However, they must to have a significant stake in the company. They could be individuals or corporations. The board could have any number of members however many believe that the maximum number of members is nine. is ideal. The board’s authority comes from its bylaws, as well as the voting rights associated with shares.
In a company that’s publically traded, it’s possible for anyone to become a shareholder through the purchase of shares. In private companies, where there are shareholders’ agreements or bylaws in place that give shareholders more control.