A corporation is managed by its board of directors, which must approve major business decisions. A director can be, but is not required to be, either a shareholder or an officer. Just as representatives in Congress are elected by voters, directors are elected by the shareholders and typically serve for a limited term. Each corporation must have at least one director.
Examples of procedures which must be approved by the board of directors include:
- Declaring a dividend
- Electing officers and setting the terms of their employment
- Amending bylaws or the articles of incorporation
- Any corporate mergers, reorganizations or other significant corporate transactions
Directors of a corporation owe "duties of loyalty and care" to the corporation. Generally, this means the directors must act in good faith, with reasonable care, and in the best interest of the corporation. If a director stands to personally gain from a transaction with the corporation, he or she must disclose this fact and refrain from voting on the matter, if possible.