The board of directors and shareholders are both important elements in the structure of any company. Both have distinct roles, however they share the same goal to ensure that the company’s success and sustainability in the long run. Understanding these roles and their interactions is essential to ensuring good corporate governance.

The board of directors are an organization of people who are chosen by shareholders to oversee the company. They typically meet regularly to establish guidelines for the overall supervision and management of the company. They also make decisions on a short-term basis for example, hiring or firing employees, negotiating an agreement with a service provider and making strategic partnerships. The primary role of the board is to safeguard the shareholders’ investments by ensuring that the business is operating smoothly and efficiently.

While there aren’t any legal requirements that directors must be shareholders (in fact, the first directors could be listed in the Certificate or Articles of Incorporation, or selected by the incorporator), they do have to have a significant interest in the company. They can be either individuals or corporations. The board can comprise any number of members, however, many believe that nine members is the ideal number. The board’s authority comes from its bylaws as well as the voting rights that come with shares.

Anyone can become a shareholder of the public market by purchasing stock. However in private companies with a shareholders agreement or bylaws the shareholders may have greater control web link over who may be a shareholder.