Board Roles, Corporate Bylaws, and Franchise Operations Essentials

Corporate Governance: The Board of Directors

Purpose and Functions of the Board of Directors

The Board of Directors is a group of people who jointly oversee the activities of a company. Their primary functions include:

• Representing the interests of the shareholders and the company stakeholders.
• Determining dividend policy and distribution to shareholders.
• Approving annual budgets.
• Supporting the CEO (or hiring/replacing top executives).
• Hiring and firing top executives.
• Deciding on executive compensation.

Who Appoints the Board of Directors?

The shareholders of a public company choose the members of the Board of Directors. This selection process may vary depending on the type of business structure.

Executives Reporting to the Board

The CEO and the President are typically positioned below the Board of Directors. Since the Board is chosen by the shareholders, it is responsible for making the most important strategic decisions for the company.

Key Corporate Documents

Information Contained in the Memorandum of Association (MOA)

The Memorandum of Association (or Articles of Incorporation) typically includes fundamental information about the company, such as:

• The official company name.
• The company's objectives and scope of business.
• The company's structure and capital details.

Outsider Interest in the Memorandum of Association

The MOA is primarily of interest to outsiders who need to understand the company's legal capacity and structure. Interested parties may include competitors, potential investors, or creditors.

The Articles of Association (AOA) and Company Bylaws

The Articles of Association (or Company Bylaws) are mainly of interest to insiders, who are typically the shareholders, employees, and directors.

Information Contained in the Articles of Association

The AOA details the internal management and operational procedures of the company. This information may include:

• The rights and responsibilities of workers and employees.
• The organizational chart and roles of the directors.
• Rules governing company meetings and voting procedures.
• The formal procedure for making company decisions.

Understanding Franchising

Key Provisions from the Franchisor

The franchisor provides the franchisee with essential elements necessary to operate the business successfully:

• An existing business model.
• An established brand.
• Operating systems and models.
• Marketing strategy.
• Training and ongoing support.

Factors for Franchise Success

Franchise success is dependent on many factors, including:

• The strength and recognition of the brand.
• Effective business support provided by the franchisor.
• Optimal location.
• Managing initial and ongoing costs effectively.
• The franchisee's ability to manage and control operations.