COPYRIGHTED MATERIAL
Clarifiying Roles and Responsibilities
SLIDE 12I
Shareholders Under a corporation, ownership of a business is shared . Corporations issue shares of stock to owners in accordance with their percentage of ownership interest. This is also referred to as an equity (ownership) interest . A person who has an equity interest in a corporation is a shareholder (also called stockholder or equity holder.) A shareholder is entitled to share in the profits of the corporation. When a startup forms a corporation, it issues shares to the team members. Some members receive more shares than others. After all, some team members’ skills are more valuable than other’s, or some have a longer involvement in the project or were primarily responsible for coming up with the team’s idea in the first place. Others may have spent personal savings on funding R&D or buying supplies so may receive additional shares as repayment. The original innovator and founding team member receives the majority of the shares, making him or her the majority shareholder . However, a corporation can consist of just one shareholder. Corporations are formed by completing and signing corporate bylaws which layout the rules for how the corporation will run, and Articles of Incorporation , which bring the corporation into legal existence. Advise students that their innovation teams will issue shares to the founding members of their startup in accordance with the member’s value to the team, and will sign bylaws and articles. Directors Leaders of a corporation are called directors , officers and executives . Together, they are charged with the duties and responsibilities of running the company and making many important decisions. Once shares are distributed, a board of directors is formed by vote of the shareholders. With a small corporation or startup (such as students’ innovation startups), the shareholders often also act as the directors. Directors are responsible for guiding the direction of the company in such a way as to protect the value of the shares ( shareholder value ). The Chair of the Board of Directors is a powerful position. He or she leads board meetings, sets and controls board meeting agendas, mediates issues, and makes procedural decisions that can affect the direction of the company. Directors appoint the officers and executives of the corporation. Officers and Executives Corporate officers and executives are responsible for the day-to-day management of the corporation’s business : • The Chief Executive Officer (“CEO”) , is responsible for the corporation's entire operations. He or she reports directly to the Board of Directors. Often, the CEO is also named as the president of the corporation . In smaller companies, the CEO may also serve as the Chair of the Board of Directors. • The Chief Operating Officer (”COO”) , is responsible for marketing, sales, production, and employee hiring and policies. • The Chief Financial Officer (“CFO”) is responsible for analyzing and reviewing financial data, reporting financial performance, preparing budgets, and monitoring expenditures and costs. PRODUCT PREVIEW
Lesson 12 | Business Blast 222
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