The board of directors and shareholders are two essential elements in the structure of any company. Both have distinct roles, but share the same goal: to ensure the success of the business and sustainability on the long-term. Understanding the roles of each and their interrelations is key to good corporate governance.

The board of directors is a group of individuals elected by shareholders to supervise a company. They usually meet on a regular basis to create policies regarding overall oversight and management. In addition they make the short-term decisions like firing or hiring employees, entering into an agreement with the provider or signing strategic partnerships, and many other. The primary role of the board is to protect the investment of shareholders by ensuring that the business is running smoothly and efficiently.

Although there is no legal requirement that directors be shareholders (indeed, the initial directors can be listed in the Certificate of Incorporation or Articles or appoint by the incorporator) Directors must hold a significant stake in the company. They may be individuals or corporations. The board could be comprised of any number of persons however, the majority of people believe that nine members are the ideal. The authority of the board comes from its bylaws as well as the voting rights that come with shares.

In a company that is publicly traded, it is easy for anyone to become a shareholder via the purchase of shares. However, in private companies where there is a shareholders agreement or bylaws, the shareholders could have greater control over who may be a shareholder.