You might have heard the terms’shareholders’ and “board directors” in movies and on TV, but you may not know what they mean for a business. Both are distinct roles with important differences that a business must be aware of for optimal performance.
Shareholders are the collective owners of companies who elect a board of directors to run their company and watch at their investments’ interests. The board has a legal obligation to manage for shareholders and to help companies grow. Sometimes directors have shares in the company. However this is not the norm.
The board of directors creates guidelines for the overall oversight of the company and management, and meet regularly to discuss and resolve problems. It is a major duty of the board to be comprised of a diverse group of people who are knowledgeable and independent to oversee the operations of the business.
Directors are responsible for making decisions that will benefit the company in the long run, hiring managers and corporate officials who will manage the day-today activities, and communicating company corporate culture to employees. They are also responsible to ensure the financial health of the business by ensuring that its finances are sound and that there aren’t any instances of fraud.
A shareholder cannot directly influence or alter decisions made by the board. However, they are able to declare their support or disapproval. They are also able to remove directors from their position within the company, provided they do so without violating their Shareholder Agreement or corporate bylaws.
