Duties and responsibilities of corporate stakeholders in public and private corporations

Duties

The directors of a corporation are, essentially, the representatives of the shareholders in the administration of the company. They are charged with the task of administering the corporation in such a way that preserves the assets of the shareholders, and that they receive a good return on their investments. As such, the Board of Directors is the "highest governing authority within the management structure at any publicly traded company" (Kennon, 2012).

Among the tasks that the directors perform that help them in their role are the following: to select the Chief Executive Officer and set the CEO pay; evaluate the attractiveness of and to authorize dividends; recommend stock splits and share repurchase programs; approve the company's financial statements and give advice on mergers and acquisitions (Kennon, 2012). The Board often works with the CEO on some of these issues, such as dividends and M&A activity, but the Board is also responsible for hiring and firing the CEO. The directors are usually a mix of outside directors with experience in senior executive roles and perhaps one or two inside directors from the ranks of senior management. The board therefore provides expert management for the company by overseeing the different activities of senior management and ensuring that the senior managers are operating with the best interests of the shareholders in mind.

There is also a distinction between shareholders at a public company and those at a privately-held company. While a privately-held company will still have shareholders, the role of the directors may change a little bit. However, each company is free to define the role of the directors differently. The one common theme is that directors in a privately-held company will still be focused on maximizing shareholder value. They might be more hands-on, or they might be

In the management structure of the firm, the officers are charged with operating the company. They make the strategic and tactical decisions that determine how the corporation is to grow shareholder wealth. Thus, each officer has a functional area in which he or she specializes. These include finance, IT, marketing, and other areas, depending on the firm. The Chief Executive Office is a unique role within the organization because the CEO is responsible for the hiring and the activities of the other officers. The CEO also guides strategy on a broad level.

There are special responsibilities for the CEO and CFO under the Sarbanes-Oxley Act. Under the Act, these two officers bear special responsibility for the accuracy of the financial statements. These officers must sign sworn statements that attest "to the accuracy of their companies' most recent annual and quarterly reports" (SEC.gov, 2002).

Thus, the officers of a corporation have a duty to conduct their operations in a manner that will lead to the improvement of shareholder wealth. They must set strategy within their field of expertise, and bear responsibility for the performance of the firm. They are answerable directly to the CEO and indirectly to the Board of Directors. It is ultimately only duty that the officers have to pursue shareholder wealth and uphold the law; they are not bound by the shareholders to strictly pursue shareholder wealth. The specific roles within their departments are to be decided upon by the CEO and the Board.

The final group within the management structure of the firm is the shareholders. Shareholders are generally not active in the management of the company but since the company is under their ownership, they do have some different roles that help them to preserve this investment. The Board of Directors serves as the proxy for the shareholders, but the shareholders must choose the Board. To this end, there are annual or semi-annual votes on a number of issues pertaining to the management of the corporation, and it is a duty of the shareholders to vote on these issues. In many cases, an initiative cannot pass without a certain percentage of the shareholders voting.

The shareholders must vote to elect the members of the Board. The CEO or other Board members may recommend candidates, but the shareholders must ultimately approve of the new Board member before that person can take the role. Shareholders with a significant stake will often take an active role in this process. Another thing that shareholders must vote on is the external auditor. It would be conflict of interest for the Board or the officers to elect the auditor who is charged with the task of verifying their work, so this responsibility falls to the shareholders.