Board of Directors
When there are more than one or two directors, they are collectively called as Board of Directors. The Board of Directors is accountable for running the company. The Board of Directors deals with the day-to-day functions of the company.
The shareholders of the company appoint the Board of Directors in the annual general meeting. The shareholders can remove the directors if they are not functioning properly and not giving returns to the shareholders.
Out of the Board of Directors, specialized directors are selected to do different specialized jobs. The Chief Executive Officer (CEO) is the leader of the Board of Directors. There are other officers as well. They are as follows:
The Chief Financial Officer;
The Chief Legal Officer.
These are the heads of the respective branches. The preceding list is merely indicative and not exhaustive.
Responsibilities and Duties of The Board of Directors
The directors’ job is to manage the company, bring returns to the shareholders, and expand. Following are the managerial duties and responsibilities of the directors:
Duty of care; The directors must manage the company diligently. The directors have plenty of money and power in their hands. The money and power are entrusted to them by the shareholders of the company. The directors’ job is to manage the money and power carefully and not spend it on nugatory things, which do not benefit the company. The directors must use the money and work for the benefit of the company and its shareholders. Money and power must never be used to make selfish gains. It is also corporate fraud to do so. The directors can be criminally liable under federal and state laws for theft and fraud of the company property. The directors are in a fiduciary relationship with the company and the shareholders.
Duty to disclose information; The directors have to report to the shareholders. The reporting must be accurate and must contain all the material data relating to the company. Some of the reporting relates to:
Balance sheet reporting;
Profit and loss statements;
If the director identifies any fraud, it is his job to report the same to the shareholders.
Compliance with the law As the shareholders are not concerned with the company’s day-to-day functioning, the directors are responsible for managing the corporate law compliance. There are many laws such as :
Corporate Social Responsibility;
All the laws need to be complied with. The directors must keep a check on the compliance of the company with the laws mentioned above.
Duty to hold meeting; The directors have to hold a Board meeting with other directors. The directors also have to arrange annual general meetings with the shareholders. The law mandates having at least one Annual General Meeting.
Supervision of the Shareholders Over the Directors
Even though the day-to-day functioning is in the hands of the directors, it cannot be said that they have the right to do anything with the company. They are directly accountable to the shareholders. The shareholders always have supervision over the actions of the directors. The shareholders keep a watch and have the power to do the following:
Remove the directors If a director is not working diligently or is engaged in fraud or willful misconduct, then the shareholders can remove that director.
Initiate criminal proceedings; The shareholders have the power to initiate criminal proceedings against the directors as well.
Appointment of new directors The shareholders have the power to appoint new directors in the place of the old directors.
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