The Difference Between Shareholders and Board of Directors

18-10-2023 | Property Development

You may hear the terms’shareholders and board of directors’ in movies and on television but you may not know what these roles actually entail for a company. They are two distinct roles with significant differences that companies must understand in order to function optimally.

Shareholders are the collective owners of companies who elect an executive board to oversee their company and watch at their investments’ interests. The board has an legal obligation to govern for the shareholders and to help companies grow. Sometimes directors are shareholders in the company. However this is not the norm.

The board of directors establishes policies for overall company oversight and management, and meets regularly to discuss and resolve issues. It is the main duty of the board to be composed of a diverse group of people who are competent and independent to oversee the operations of the company.

Directors are responsible for making decisions that will benefit the long-term health of the company, namely hiring corporate officers and managers who oversee day-to-day tasks, and communicating the company’s culture to all employees. They are also responsible to ensure the financial health of the company by ensuring that its financials are sound and there aren’t any instances fraud.

A shareholder is not able to directly influence or amend the decisions of the board. However, they can vote in opposition or approve. They also have the power to remove directors from their position within the company, as long as they do not violate their Shareholder Agreement or corporate bylaws.


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