Some people are confused by the difference between boards of directors and officers. Let’s take a look at how the two function, at least theoretically.
A board of directors is the governing authority of the company. They are empowered or selected by shareholders in an election. Board members are charged with the authority to make the business actions and the desires of the company happen. It’s their job to execute and to make things happen in the best interest of shareholders.
A board typically functions at a very high level. Directors don’t focus on the day-to-day affairs of the company. They look at the long-term strategy, recent performance, and how all of that plays together and whether the company is doing what it needs to do. It is their job to then find and install appropriate officers to execute on the day-to-day.
Officers are employees of the company who typically report to the board of director. Officers carry out the desires of the board of directors. This is a tiered structure, typically. Shareholders install the directors, who look long-term and big-picture. The directors hire officers, who have more nuanced, day-to-day authority. The officers report back to the board.
We see very clear differences in ways the officers and directors operate. All of these individuals should still be working for what’s best for the company and the shareholders, and they should be giving great effort to make that happen. But how and what they do is going to vary greatly.
What are your thoughts about boards and officers? Have you been confused about this in the past? What have you done to clarify these roles in your company? Join us in the comments below and let us know your thoughts and experiences.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Leszek Soltys.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.
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