Businesses need the continual guidance and oversight of experienced company officers, however, internal management may become desensitized to certain situations or lack the experience to handle them. A board of directors makes up an integral part of the overall management team, and fills an important requirement for many companies.
A board of directors is a group of individuals chosen to oversee and govern corporations or other large entities. In a corporation, the board of directors is required and will be elected or appointed by shareholders. The board of directors establishes corporate policies, makes high-level management decisions and creates policies to guide the efforts of the organization. In some situations, the board of directors serves mainly as a group chosen to advise, assist and make recommendations for policies. The state a company incorporates in will determine how many directors the board needs to maintain. Each state also mandates that the board of directors meets annually.
Officers are individuals that manage the daily business and affairs of the corporation. Usually, the corporation's officer ranks consist of the president, chief executive officer (CEO), chief financial officer (CFO), vice president, treasurer and secretary. Depending on the size of the business, one person may hold more than one of the titles concurrently. Executive officers of a corporation have authority to legally bind the corporation. Officers do not have personal liability for their acts while they are acting lawfully on behalf of their corporation.
The board is expected to make decisions that are responsible and in the best interest of the corporation. As a corporation expands and deals with new challenges, it may bring in additional directors to provide other expertise or opinions on various business issues. The board of directors usually establishes policies for the business to follow and make major decisions, such as creating and maintaining a set of bylaws, issuing any dividends, approving mergers or major contracts, and approving appointed or elected officers. It also makes decisions about acquisitions and the disposals or changes in real estate managed or owned by the corporation.
Each state has statutes that specify the type of officer positions each corporation must fill. The president or CEO has responsibility for the corporation's overall activities on a daily basis. The CEO will sign stock certificates, major contracts, and legal and other documents as needed, taking direction from the board of directors. For important actions performed on behalf of the corporation, the CEO will perform actions based on a corporate resolution. A vice president is not required by every state's corporation statutes. When a corporation does have a vice president, she fills in whenever the board of directors assigns specific tasks or when the CEO is not available.
A chief financial officer or treasurer has responsibility for all matters that involve finance. In a larger business, the role would involve mainly oversights; in a smaller corporation, the treasurer or CFO will be involved in daily financial functions. A treasurer maintains corporate financial records and has responsibility for preparing financial reports and presenting them to the corporation's board of directors, other officers and shareholders. A corporate secretary has responsibility for the maintenance of corporate records and preparation of the minutes from board or shareholder meetings. The corporate secretary might also need to provide his certification for a bank or other type of financial institution and also may need to provide requested corporate documents.