The Responsibilities of a Director

A company director is responsible for the company’s governance and must ensure that it complies with all legal requirements. Read more to learn about the different types of directors and their responsibilities.

A director’s primary duty is towards shareholders and ensuring compliance with general and specific laws relating to the company’s operations.  

As a director, you are responsible for overseeing the operations and performance of a company, working closely with other management team members to ensure that projects are completed on time and within budget. This includes setting objectives, developing strategies and ensuring compliance with industry regulations.  

Directors also have a fiduciary duty to shareholders. A director must act in the best interests of the company and shareholders and make decisions in the company’s best interests (even if they may not be popular with employees or other stakeholders).  

Directors usually report to the Chief Executive Officer of a company and sit on the board. A Chairman heads the board, which is usually a non-executive role tasked with the organisation’s overall direction.  

The board makes decisions on big-picture items such as the company’s strategy, investments, and acquisitions. In smaller companies, there may not be a CEO or Chairman. The director would have more power and responsibilities and would be typically responsible for the organisation’s day-to-day operations.  

Overall, the responsibilities of a director require a great deal of skill, knowledge, and experience to be successful.  

Types of Directors  

The responsibilities of a board of directors depend on the four types of directors: executive, non-executive, independent and shadow.  

Executive Director  

An executive director is a full-time employee who has a say in the day-to-day operations and management of the company. They’re often the CEO or managing director.  

Common posts include Finance, Human Resources and Sales & Marketing directors. Each director manages their 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 issues holding the company back.  

A managing director to be hands-on in running the business, oversee salary and payroll and get involved in targeted recruitment. The managing director manages the board of directors, leads the company’s overall performance, and reports back to the chairman and the board.  

Non-executive Director  

A non-executive director is not an employee of the company and is involved in overseeing the board’s work, typically as a senior figure with significant business experience.  

Non-executive directors 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 in-house directors might overlook.  

Independent Director  

An independent director is not an employee of the company but has no affiliation with any other stakeholder. They are responsible for ensuring adequate checks and balances against conflicts of interest, such as self-dealing or related-party transactions.  

Independent directors are often picked for their business acumen and extensive knowledge of the industry. They play a vital role in ensuring that there is no corruption or unethical behaviour in the company and that shareholders’ interests remain protected.  

Shadow Director  

A shadow director is not formally appointed as a director but whose instructions or wishes the board follows. For example, a family member or other close associate of the CEO may influence board decisions without holding an official position.  

Shadow directors are often in a position of significant power within the organisation. Because they do not have an official role, they can operate behind the scenes and exert their influence without being held accountable.  

Selecting a Director for your Company 

It is crucial to be aware of the legal and ethical responsibilities of a director when making decisions. You must ensure that all transactions comply with relevant laws and regulations, protect shareholders’ interests, and avoid conflicts of interest. By establishing the responsibilities of a director of a company, you can find the best-fitting people for the role and ensure your company’s success and longevity. 

If you’re in the process of selecting a director for your company, get in touch with us