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Rights & Responsibilities of Executive Officers & Members of the Board of Directors

by Louis Kroeck

Different organizations may assign different rights and responsibilities to their officers and board members, depending on the nature of the organization. However, the members of a board of directors will always have rights and responsibilities different from those of executive officers within the same organization because the two groups are meant to serve different roles.

Boards of Directors and Their Duties

Generally, a board of directors is responsible for functions such as approving a corporate strategy, naming the executives of the company, designing executive compensation packages, monitoring the success of company executives, approving major asset purchases, representing the interests of shareholders, and protecting the assets and reputation of the company. Executive officers report to the board of directors. A board of directors has the right to call meetings in order to remove company executives and replace them with new leadership if the organization is in turmoil. They also have the right to demand reports and financial information from executives.

Fiduciary Duty

The duty of a board of directors to the shareholders of the company is encompassed in a concept called a fiduciary duty. Under their fiduciary duty to shareholders, members of a board of directors are prohibited from self-dealing, or acting in their own interest ahead of the interests of the company. A board member also has a duty of candor to faithfully report company happenings to shareholders, as well as a duty of care to make decisions on behalf of the corporation with due diligence.

Executive Officer Duties

Executive officers generally include a chief executive officer, a secretary and a treasurer, although these officers may operate under different titles. The executive officers of a company are in charge of submitting strategic plans to the board for approval, preparing and submitting financial reports to the board and accounting for the business activities of the company before the board of directors. Company executive officers have all rights associated with the organization that are not held by the board of directors. Executive officers have the right to hire and fire routine employees and manage all company affairs not reserved by the board.

Nonprofit Considerations

If the organization is a nonprofit organization, the board of directors may also assume responsibilities related to managing relationships with organization members and creating objectives related to membership retention and membership donations. Executive officers, on the other hand, may be required to obtain grants from the federal government as well as from private foundations. Although the funding sources may differ, many of the responsibilities of the two groups will remain unchanged in a nonprofit setting.

About the Author

Louis Kroeck started writing professionally under the direction of Andrew Samtoy from the "Cleveland Sandwich Board" in 2006. Kroeck is an attorney out of Pittsburgh, Pennsylvania specializing in civil litigation, intellectual property law and entertainment law. He has a B.S from the Pennsylvania State University in information science technology and a J.D. from Case Western Reserve University in Cleveland, Ohio.

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