The Role of Corporate Directors
In our last blog post, we discussed the concept of the “Corporation” – what a corporation is, how it is formed, and what it can legally do. In this article, we are going to discuss the role of the “brains” of the Corporation – the Directors.
How does one become a Director of a Corporation?
Directors are elected by the voting shareholders of the Corporation. This is typically done on an annual basis at the Corporation’s Annual General Meeting.
What do Corporate Directors do?
At its core, the role of the directors is to provide leadership and direction to the corporation. Directors are responsible for setting the corporation's strategic goals and objectives, and for developing and implementing plans to achieve those goals. Directors do not typically manage the Corporate ‘day to day’ operations (that is usually carried out by a management team or officers – which will be discussed in a later blog post), but instead provide high-level guidance to the management team, who will implement it at the practical level.
Directors are also responsible for ensuring that the corporation complies with all applicable laws and regulations. This includes confirming that the corporation’s financial statements are accurate and complete, and that the corporation's operations do not violate any laws or regulations.
Another crucial responsibility of directors is overseeing the performance of the corporation. They monitor the financial performance of the corporation, evaluate whether it is delivering value to its shareholders, and assess whether the management team is performing effectively.
Directors are also responsible for managing risk within the corporation. This includes identifying and assessing potential risks, developing risk management strategies, and monitoring the effectiveness of those strategies. Directors are also responsible for ensuring that the corporation has appropriate insurance coverage to protect against potential risks.
One of the most important roles of directors is to act in the best interests of the corporation and its shareholders. This means making decisions that are in the long-term interests of the corporation, even if they may not be popular or immediately beneficial to shareholders.
Finally, directors must communicate regularly with shareholders. They provide updates on the corporation's performance and strategic direction, and they engage stakeholders to understand their concerns and perspectives.
In conclusion, the role of directors in a corporation is critical to its success. Directors provide leadership and direction, ensure compliance with laws and regulations, oversee performance, manage risk, establish governance structures, act in the best interests of the corporation, and communicate with stakeholders. The effectiveness of a corporation is often dependent on the effectiveness of its board of directors, and corporations must attract and retain talented and experienced directors to ensure that their operations are guided and directed in the best possible manner.
