Corporations have different levels of management, and some of the main responsibilities of the company are divided up between the shareholders and board of directors. Members of the the board of directors are appointed to the position for the company, and they hold certain powers to make decisions for the company. Although individual shareholders do not have as much power, the total group of shareholders also helps make important decisions for the company.
Comparing the Two
When a corporation starts out, the founders of the company create an articles of incorporation, which provides information about the company and lists the names of the board of directors. From that point, members of the board can resign and be appointed throughout the life of the company. Individuals become shareholders by buying shares of stock in the company. Shareholders get to vote on the board of directors when someone needs to be replaced.
Board of Directors Responsibilities
The board of directors is in charge of a number of responsibilities for a company. One of the primary objectives of the board of directors is to appoint a chief executive for the company. The board also monitors the performance of this executive and can replace him if necessary. The board of directors also sets broad policies and objectives for the company. This board aims to provide continuity for the company through the daily changes in stockholders of the company.
When you become a shareholder in the company, you have certain rights that you can exercise. Holders of common stock get voting rights on important matters. The most common issue that shareholders get to vote on is the board of directors. Shareholders get to elect the board of directors to help run the company and typically vote on this at the annual shareholder meeting. If the board of directors has any important issues for the shareholders, such as a merger or acquisition, the shareholders can also vote on this. The shareholders also have the right to receive dividends from the company depending on how much the board of directors allocates for dividends.
The board of directors and the shareholders of a company have to work together to make the company run effectively. The shareholders essentially pick the board of directors and then they trust these directors to run the company in the proper manner. This means that indirectly the shareholders run the company and have the ability to change the hierarchy of it if something is not working out. This holds the board of directors and the CEO of the company accountable at all times.