The board of directors of a joint stock company is elected bya)Employeesb)Government bodiesc)Shareholdersd)General publicCorrect answer is option 'C'. Can you explain this answer?

Question

Answer

The Shareholders Meeting of a joint stock company (JSC) has the authority to appoint and dismiss members of the Board of Directors. Appointment of a Board Member must be conducted through cumulative voting. Under cumulative voting principle, whenever a JSC elects new Board Members, each shareholder will have a number of votes equal to the number of new Board Members to be elected times the number of voting shares held by such shareholder and such shareholder may cash all or some of his/her votes for any candidate.

Answer

It is true that the Board of Directors are elected by the shareholders. Shareholders are the real owner of the company. They have voting right to elect their board of directors. They elect 3 directors, who will run the organisation. They are selected by their specialisation, qualifications etc. They are elected because all the shareholders will not take part in management. For example, X limited issued 5000 Shares @10 each and all the shares are fully subscribed, called up and paid up. Now all the shareholders are owner of the company. So, if all the shareholders come one by one togetherly then it will be a very big problem for the management so then they decide among themselves and vote for board of directors.And they elect 3 directors for managing the organization.

Answer

C

Answer

They sre elected to hold out the company

Answer

The Role of Shareholders in Electing the Board of Directors
In a joint stock company, the board of directors plays a crucial role in governance and decision-making. The election of this board is a fundamental process that reflects the ownership structure of the company.
Who Elects the Board?
- The board of directors is elected by shareholders.
- Each shareholder has voting rights proportional to the number of shares they own, enabling them to influence who sits on the board.
Why Shareholders?
- Ownership Rights: Shareholders are the owners of the company. They invest capital in exchange for shares and expect a return on their investment, making it essential for them to have a say in the management.
- Accountability: The elected board is accountable to the shareholders. Their role includes setting company policies, overseeing management, and ensuring that the company operates in the best interest of its owners.
Process of Election
- Elections typically occur during the company’s annual general meeting (AGM).
- Shareholders may vote in person or by proxy, depending on the company's bylaws.
- Special resolutions may be required for certain decisions, ensuring that a majority of shareholders support the chosen candidates.
Conclusion
In summary, the election of the board of directors by shareholders is a vital aspect of corporate governance. It empowers owners to influence the strategic direction of the company while holding the board accountable for its performance. This process reinforces the principle that shareholders, as investors, should have a direct say in the management of the companies they own.

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