The Role of Directors and Officers in a Corporation

The role of directors and officers in a corporation depends on the company. A board of directors is a body of elected or appointed members who jointly oversee the activities of a company. The role of directors in a company are outlined in the corporate by-laws, and their main responsibility is to act on behalf of shareholders. Scroll down to learn more about the role of directors in a corporation.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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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.

What Is The Role of The Board of Directors?

A board of directors is a body of elected or appointed members who jointly oversee the activities of companies. 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.

Depending on the corporation, a board of directors in the United States may only be responsible to meet in an annual meeting or a few times a year. Others work standard business hours. In some organizations, board meetings are only a small part of what they do.

In corporations, board members and the corporate director are paid salaries. They are chosen for their business acumen and other factors. If you’re talking about a non-profit, board members may be volunteers reimbursed only for expenses.

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What do corporate officers do?

The board of directors appoints corporate officers to handle daily operations. The corporate officers usually consist of a president, one or more vice presidents, the secretary, and a treasurer. You might be familiar with terms like CEO (chief executive officer) or CFO (chief financial officer). In larger enterprises, there may be hundreds of officers. Each state’s corporation statute will specify the officer positions that must be filled. Officer duties vary by position, but the main responsibility is the effective operation of the company. Officers are responsible for the management and day-to-day operations of the corporation.

  • The CEO or president acts under the direction of the board of directors. He or she is responsible for a high-level overview and the direction of the company. The CEO typically signs major contracts and approves business arrangements, stock offerings and other legal documents. This person is often seen as having the highest fiduciary duties to the company and shareholders. Many chief officers also see themselves as responsible to employees.
  • The chief operating officer oversees operations and reports to the CEO
  • A chief information officer and a chief technology officer both focus on computer technologies used by the company; although, there are some differences between the roles
  • The chief marketing officer oversees the company’s marketing initiatives
  • A chief diversity officer oversees inclusion strategies
  • The chief design officer oversees the design of the company’s products or services
  • A chief risk officer handles the risks related to the company
  • The chief procurement officer is accountable for acquisition programs

Not all states require a vice president; typically, this is a position to support the president when it is required. Larger corporations often have a vice president of sales, vice president of operations, etc. The idea is to provide additional support for each chief officer in the different divisions.

What are the roles 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. Their fiduciary duties are wider in many ways.

The secretary is the keeper of the corporation’s records. This person also reports information to oversight agencies and in some cases, to the public. So if the finances are being mishandled in a way that would break the law, the secretary may report it to or work with state auditors to address reports.

What are the differences between directors and officers?

Directors and officers share some duties. In some corporations a person can hold both positions. This is most common in smaller organizations where people are more likely to wear multiple hats. In larger corporations, people can go between roles, but they are generally assigned as one or the other. There are two significant things officers do 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. Corporate governance in daily business operations applies more heavily to directors.

Similarly, some directors serve on multiple boards at once. If you’re talking about Fortune 500 boards, they are generally leaders in their field. So their services come at a premium. Some have held positions such as that of a corporate president before. A current sitting CEO, COO, etc. is unlikely to hold multiple positions.

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