Understanding the Role and Responsibilities of Directors

C

The stockholders elect the board of directors, which in turn decide on the major business policies of the corporation.

Among the given statements, the correct statement about directors of a company is:

C. Directors are shareholders' representatives.

Explanation:

A. Directors only get paid if the company increases its profitability that year. This statement is incorrect. Directors of a company typically receive compensation for their services, which may include a combination of fees, salaries, bonuses, and stock options. Their compensation is not solely dependent on the company's profitability in a given year.

B. All directors of a company are senior managers in that company. This statement is incorrect. While it is possible for directors to be senior managers within a company, it is not a universal requirement. Directors can be individuals from various backgrounds and may or may not hold senior management positions within the company. The board of directors is responsible for overseeing the company's strategic direction, governance, and management decisions.

C. Directors are shareholders' representatives. This statement is true. Directors serve as representatives of the shareholders' interests. They are responsible for making important decisions that affect the company, such as setting strategic goals, appointing executives, and monitoring management's performance. Directors act as fiduciaries, meaning they have a legal duty to act in the best interests of the company and its shareholders.

D. Directors are elected by management of a company. This statement is incorrect. Directors are elected by the shareholders of a company. Shareholders typically vote on the appointment of directors during the company's annual general meeting or through a proxy voting process. The management of the company, including executives and senior managers, generally report to the board of directors and are responsible for implementing the decisions made by the board.

In summary, the correct statement is that directors of a company are shareholders' representatives (C). They are responsible for representing the interests of the shareholders, making important decisions, and overseeing the company's management.