The Role of Directors and Officers in a Corporation
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Depending on the company, the board of directors and officers can be made up of the same individuals. The board of directors and officers often work closely together, but play very different roles in the corporation.
Defining Board of Directors and Director
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company. While their duties are outlined in the corporate by-laws, their main responsibility is to act on behalf of shareholders. Typical duties of the board of directors include governing the organization by establishing its mission, policies and objectives; selecting, appointing, supporting and reviewing the officers; approving annual budgets; and accounting to the shareholders for the corporation's performance.
Understanding Corporate Officers and What They Do
The board of directors appoints corporate officers. The corporate officers usually consist of a president, one or more vice presidents, the secretary, and a treasurer. In larger enterprises, there may be hundreds of officers. Officers are responsible for the management and day-to-day operations of the corporation. Each state's corporation statute will specify the officer positions that must be filled by each corporation. Officer duties vary by position, but the main responsibility is the effective operation of the company.
The CEO or president acts under the direction of the board of directors. He or she is responsible for the overall day-to-day activities of the corporation. The CEO typically signs major contracts and approves business arrangements, stock offerings and other legal documents. Not all states require a vice president; typically, this is a position to support the president when it is required.
Role of Chief Financial Officer and Secretary
Almost all states require a treasurer or chief financial officer and a secretary. The treasurer handles the corporation’s financial issues, maintaining those records and presenting them to shareholders. The secretary is the keeper of the corporation’s records. The secretary also reports information to oversight agencies and in some cases, to the public.
Differences between Directors and Officers
While directors and officers have some similar duties, and in some corporations an individual can hold both positions, there are two significant characteristics officers have that directors do not. They have the authority to legally bind the corporation. In addition, corporate officers are generally not personally liable for lawful acts taken on behalf of the corporation.