InvestorQ : What if the institutional investors have a considerable stake in a company?
divya Sing made post

What if the institutional investors have a considerable stake in a company?

Answer
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vani Patil answered.
1 month ago


Directors are the mangers of the company while shareholders are the owners of the company. In any business, the owners will appoint the managers to the company. So, the shareholders will have a say in the process of forming the Board. The purpose of a Board of directors is to represent the interests of shareholders of the company. If you own a significant percentage of available shares, that would get you a seat on the board. Individuals with significant industry experience, people who have proven strategic thinking capacities, and folks with exceptional interpersonal and/or negotiation skills are also great candidates.

Thus, if we look at it from this perspective, mutual funds owning a considerable chunk of the company‚Äôs equity will have the right as well as the skill and experience to choose/recommend a board member. Their industry knowledge, expertise, and well-entrenched contacts make them a good candidate to choose a board member. 

However, they have to abide by the rules of the regulatory body. According to these rules, a total of two-thirds of directors are appointed by the shareholders. The rest of the one-third remaining members are appointed with regard to guidelines prescribed in the Article of Association.