The board of directors and shareholders are both vital components of the structure any business. Despite having different roles, they share the same goal of ensuring the company is successful and sustainable in the long run. Understanding the roles of each and their interrelations is key to good corporate governance.

The board of directors is a collection composed of people elected by shareholders to supervise the company. Usually, they meet regularly to decide on policies that govern general company oversight and management. They also make decisions on a short-term basis like hiring or firing employees, negotiating an agreement with a provider of services, and the formation of strategic partnerships. The primary function of the board is to safeguard the shareholders’ money by ensuring that the business is operating smoothly and efficiently.

There aren’t any legal requirements that the directors must be shareholders (in fact, initial directors may be listed in the Certificate or Articles of Incorporation, or chosen by the incorporator) however, they are required to have a significant stake in the company. They could be individuals, or corporations. The board can be composed of any number of persons however, the majority of people think that nine members are the ideal. The board’s authority is derived from its bylaws and the voting rights associated with shares.

Anyone can become a shareholder in a publicly traded company by purchasing stock. In private companies, if there are right here shareholders’ agreements or bylaws and the shareholders have more control.