Shareholders and the board of directors are two important components of any corporate structure. Both have distinct roles, but share the same goal: to ensure the company’s success and sustainability over the long run. Understanding www.boardroomdirect.org/what-does-it-mean-to-be-a-shareholder-in-a-private-company these roles and their interactions is crucial to good corporate governance.
The board of directors is a collection composed of people elected by shareholders to oversee the company. They usually meet on a regular basis to develop policies for the overall management and oversight of the business. In addition they are responsible for the short-term decisions such as hiring or firing employees, getting into an agreement with a provider or signing strategic partnerships, and many other. The primary role of the board is to protect the investment of shareholders by ensuring that the business is running smoothly and efficiently.
While there isn’t any legal requirement that directors are shareholders (indeed the initial directors are listed in the Certificate of Incorporation or Articles of Association or chosen by the incorporator), the directors must hold a significant stake in the company. They could be individuals or corporations. The board can be comprised from any number of members however, most people believe that 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 the public market by purchasing shares. In private companies, if there are shareholder agreements or bylaws and the shareholders have more control.