Officer vs Director: Everything You Need to Know
When comparing an officer vs. director, a director is the person who takes part in managing important business affairs, while officers oversee daily aspects of a business. 3 min read
When comparing an officer vs. director, a director is the person who takes part in managing important business affairs, while officers oversee daily aspects of a business. Officers are also directly involved in the daily management affairs of the business. An officer can be a:
- Vice president
The director is appointed by a company owner or shareholders, and is usually part of a larger board of directors. A board of directors comprises a group of people that are chosen to oversee a corporation or large entity. The directors operate in the best interest of the shareholders. Also, the directors are noted in the articles of incorporation, including corporate bylaws. The incorporator is the person who registers the corporation, and this person can also be the owner. When the corporation begins, the directors are immediately elected by shareholders during annual meetings.
When the board is appointed, it does the following:
- Makes important management decisions
- Creates policies that guide the company
In addition, the board is also legally responsible for any actions committed by agents, officers, employees, and subsidiaries. In addition, the board issues decisions on acquisitions, including any changes in real estate or any other holdings under the corporation. Other general duties include:
- Acting on behalf of the company
- Holding regular meetings
- Amending certain bylaws or parts of the articles of incorporation
- Approving various transactions and activities, including agreements and contracts, assets sales and purchases, approval of new policies, and appointing new officers
The number of board directors is determined at the state level, among other mandates. Moreover, the states require that directors must hold annual meetings. The number also depends on the holdings of the business, but is usually noted in the bylaws and/or articles of incorporation. A smaller company may only have a single director and can function as a shareholder and the only officer.
On the other hand, larger corporations may have 10 people or more more serving on the board. For voting reasons, corporations with multiple directors should keep odd numbers: 3, 5, 7, etc. As a corporation grows and contends with new hurdles, you may bring in new directors to provide vital expertise that your company needs.
A corporation’s officers may oversee a company’s daily operations, and they have the legal authority to act on the company’s behalf in all lawful activities. Officers reside over departments where they have the most expertise. For instance, the person with the most experience in finance can be appointed as the CFO. Other duties depend on the position, with the primary responsibility being the effective management of the corporation. Unless stated otherwise in the bylaws or articles, a single person can also hold more than one position.
There are times when documents mandate that officers already serve on the board. However, the directors can also be entirely different than officers. Further, officers do not retain voting rights on the board and can only vote in accordance with their station. The duties of all officers are recorded in the documents of the company. Some duties of an officer may include:
- Keeping meeting minutes
- Presiding over a meeting
- Signing contracts and other documents
They also provide analysis to the financial status on the company and can give advice on boosting sales or entering new markets. They may also appoint mid-level managers when necessary. Officers also have the authority to bind a corporation legally, especially in the case of executive officers. With that, officers have no personal liability for their actions, as they serve lawfully on behalf of the business.
The number of officer positions will depend on the company. For instance, larger companies may carry as many as 100 officers or more, and large companies may have multiple vice presidents. Companies must also refer to the statutes of their states to know what type of positions need to be filled by officers.
Importance of the CEO
The Chief Executive Officer (CEO) is the person who holds the most responsibility within the business. This person would sign contracts or any other legally binding measure for the company. However, the CEO must answer to the board of directors. The CEO usually approves the following:
- Issues stock
- Business arrangements
- Important legal paperwork
To learn more about an officer vs. director, or for help with navigating corporate officer and director requirements, you can post your job on UpCounsel’s website. UpCounsel’s attorneys have graduated from some of the top law schools in the nation and will guide you in setting up your corporation. Moreover, they will provide insight if you intend to create a large corporation and need more information on your state laws.