You may have heard the terms “shareholders and board of directors’ in films and on TV but you might not be aware of what those roles actually mean for a business. They are two distinct roles with significant differences that every company must know in order to function optimally.

Shareholders collectively control companies and elect a board to run their business. They also choose directors to take care of their investment interests. The board of directors is legally obligated to make decisions on shareholders’ behalf and assist companies grow. Sometimes directors have shares in the company. However, this is rare.

The board of directors develops guidelines for the overall oversight of the company and management, and also meets 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 competent, independent and well-qualified to oversee the operations of the business.

Directors are accountable for making decisions that will benefit the corporation in the long run hiring managers, corporate officials who manage the day-today activities, and communicating the company’s the company’s culture to employees. They also are accountable for ensuring the financial health of a business by ensuring the company’s finances are sound and that there aren’t any incidences of fraud and by providing www.boardroomdirect.org/advisory-board-guidelines-crucial-points transparency to shareholders.

Although a shareholder is not capable of directly influencing or alter a decision taken by the board, they are able to vote in support or make objections to the decisions being taken. They also have the power to remove directors from their position in the company, provided they do so without violating their Shareholder Agreement or corporate bylaws.