The Difference Between Shareholders and Board of Directors

You may hear the terms’shareholders’ and ‘board of directors’ in movies and on television however, you may not know what these roles actually mean for a business. Both roles have distinct differences and companies must know the difference to be able to operate effectively.

Shareholders are the collective owners of companies who elect an executive board to manage their company and watch out for their investments’ interests. The board has a legal obligation to govern for shareholders and ensure that companies thrive. Sometimes directors have shares in the company. However this is not the norm.

The board of directors is accountable for creating policies that govern the overall management and oversight of the company. They also meet regularly to discuss problems and resolve these issues. It is the duty of the board to be composed of a variety of people who are unbiased, competent and well-qualified to oversee the operation boardable reviews of the company.

Directors are responsible for making decisions that will benefit the company in the long term, hiring managers and corporate officials who manage the day-to-day operations, and conveying the company’s corporate culture to employees. They also need to ensure the financial health of the business by ensuring that the company’s financials are sound and there aren’t any instances fraud.

A shareholder cannot directly influence or amend the decisions of the board. However, they can make their objections or approvals. Directors can also be removed from their positions in the company if they don’t violate their Shareholder Agreement and corporate bylaws.

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