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The Difference Between Shareholders and Board of Directors

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You may have heard of the terms’shareholders,’ and « board directors » in movies and on TV, but you may not understand what they mean for a business. They are two distinct roles, with distinct distinctions that companies must understand in order to operate effectively.

Shareholders are the collective owners of companies who choose a board of directors to manage their business and look for their investments’ interests. The board of directors has a legal obligation to govern for the shareholders and to help companies grow. Directors also sometimes own shares of the company, but this is not common.

The board of directors creates policies for overall company oversight and management, and meet regularly to discuss and resolve problems. It is the main duty of the board to be composed of a variety of people who are knowledgeable and independent, as well as well-qualified to oversee the activities of the business.

Directors are tasked with making decisions for the long-term benefit of the business, including hiring corporate officers and managers who manage the day-to-day functions, and communicating the company’s vision to all employees. They also have the responsibility to ensure the financial health of the company by ensuring that its finances are sound and there aren’t any instances of fraud.

Although a shareholder is not allowed to directly decide or alter a decision taken by the board, they can declare their approval or raise concerns about the decisions being taken. 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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