Is your business a public company? If so, it will need a board of directors that represents its shareholders’ interests. In this article, we’ll help you learn the steps you’ll need to take to fill those board seats.
What is a board of directors?
A board of directors is a group of people elected to ensure that shareholders’ voices are heard and protected in key decisions.
This group takes on a wide range of tasks. These include:
- Organizational planning
- Resource allocation
- Setting policies on options and dividends
- Approving executive pay and benefits
- Ensuring that senior managers are working for the good of the business and shareholders
Who serves on a board of directors?
Boards of directors must include people who work for the business and external members.
People working for the business may serve as inside directors. Those directors are often executives of the business with knowledge and insight that can help the board shape its strategies. Inside directors can also include major shareholders, stakeholders, or key members of the union.
External members can serve as outside directors. These members often include people with industry, organizational, managerial, or strategic knowledge that can help the business. In many cases, outside directors are paid for their time in this role. This is an incentive to give this work the focus it demands.
Your business’s bylaws should spell out the number of directors you'll need to have in place. It’s common for small firms to have as few as two directors and larger businesses to have 30 or more.
How are people elected to these roles?
Your corporate bylaws should describe the election process you’ll need to follow. Most form a nominating committee to find and present a small number of people fit to serve the business.
Some bylaws state that nominations must occur at specific times in the fiscal year or during the business’s annual meeting. Before these events, the nomination committee must present the names and bios of the candidates for the shareholders to review.
Then, during an open meeting, shareholders will elect from the list of nominees to fill the open positions, or they’ll cast a vote for a write-in candidate. They’ll either provide a written ballot or vote by voice to announce their choice.
Keep in mind that your elections will require a quorum. This is a minimum number of voters who must be present or able to vote on a matter for decisions to be valid. Your corporate bylaws should set the terms of the quorum, which should be guided by state law.
And, importantly, you must record the results of the election in your organization’s minutes.
Are there any systems to manage the voting process?
ElectionBuddy is one solution you can use for elections, including those that must fill multiple vacancies. This system allows voters to specify their order of preference for candidates (which suits organizations that hold preferential elections). It also allows voters to cast cumulative votes when they can vote more than once for a candidate.
What else should I know about these elections?
Every business sets rules for its election process. Your attorney can help you decipher them and ensure your business remains in compliance.
What’s next?
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