When analysing the structure of a business, it is important to understand the role that directors have within a company. Different companies have different hierarchies and therefore, it is also important to understand that there are different types of directorship. The responsibilities of each director towards a company’s operations, is different.
The primary responsibility of a director
A director’s primary duty is towards shareholders as well as ensuring compliance with general and specific laws relating to the company’s operations.
If a company becomes insolvent, a director’s role expands to include the interest of creditors, including employees who are still owed money by the company.
Directors usually report to the Chief Executive Officer of a company and usually sit on the board. The board is headed by a Chairman, which is usually a non-executive role that is normally tasked with overall direction of the organisation.
Managing directors have different duties
A managing director is often employed by an organisation to be hands on in the running of the business, to oversee salary and payroll and to get involved in targeted recruitment. The managing director manages the board of directors and oversees overall performance of the business and reports back to the chairman and the board.
The role of an Executive Director
Executive directors play significant roles in the specific operations of a company. Common posts include Finance, Human Resources and Sales & Marketing directors. Each Director manages their specific department to ensure that tasks, objectives and Key Performance Indicators are met. Executive directors also sit on the board.
Executive directors are often seen as the top tier of management for employees who may wish to discuss grievances, opinions of company strategy and/or issues that may be holding the company back.
Non-executive directors are brought in to look at the business from an objective outside point of view. Because they are not directly part of the business, they can often analyse and propose impartial strategies that might be overlooked by in-house directors.
Directors have the duty to exercise powers and duties with care and diligence, particularly in relation to the company’s financial situation. They also have the responsibility to carry out their duties in good faith and in the best interests of the company as well as to not use their position to gain advantage for themselves or to cause detriment to the company.
Another very important responsibility that directors have is that of ensuring that the company’s records dare always accurate and up to date for any purpose including auditing, investigation and publishing of end of year financial results.