Who Elects a Company's Board of Directors?

A board of directors is composed of individuals who oversee the management of the corporation. Depending on the kind of company they serve, the members can be elected or appointed in a number of ways.

If shares of a company are bought and sold publicly, the shareholders can vote for the directors during the annual stockholders' meeting.

If a company is held privately, the directors are chosen or elected according to the company’s particular bylaws. These are drafted before its incorporation. Often, the board oversees its own composition, which is determined at the outset by the company’s articles of incorporation.

Like private companies, non-for-profit boards are chosen according to bylaws. However, in this situation, the board is not responsible for generating shareholder profits. Rather, it is responsible for overseeing that the mission of the organization is fulfilled.

The bylaws determine the responsibilities of the Board of Directors as well as how they are elected. Generally, a board only meet several times a year and does not oversee daily operations of the company. Instead, it often makes decisions on important high-level issues, such as executive compensation, annual budget, and hiring/firing the CEO.

It is common for a board to include a combination of major shareholders, members from the management team (e.g. the CEO), as well as executives at other companies.