Company Director: Role and Duties

What Is a Company Director?

Who is the director of a company? Officially, it is a person who manages business affairs and makes key decisions. But in practice, it is much more interesting. 

Business director meaning responsibility for the company's development direction. In small companies, one person is enough, but in public companies, a whole team of directors is involved. Directorship in a company means bearing legal responsibility for the company’s success and compliance.

The Role of a Company Director

Directors in a business gather in the board of directors, which is essentially the company's “think tank.” They set long-term goals, make major investment decisions, and ensure compliance with the law. Even if operations are delegated to top managers, they still bear responsibility.

What Do Company Directors Do Day-to-Day?

Many people think: What do company directors do on a daily basis? And there is an important detail here: directors do not manage the daily routine (this is the job of the CEO and management), they are involved in oversight and strategic decisions.

Directors prepare for and attend board meetings, review reports, make strategic decisions, and assess risks. They also ensure the company operates within the law. This is a real responsibility, directors' duties and responsibilities include overseeing finances, analyzing market trends, and monitoring the work of top managers.

Company Director Job Description

Job advertisements usually provide a brief description: strategy, finance, key decisions, accountability to owners or the board. Requirements are added management experience, knowledge of corporate law or finance, leadership skills. Plus personal qualities, strategic thinking, responsibility, honesty, communication skills.

Duties and Responsibilities of Directors

The list may vary from country to country, but directors' duties and responsibilities always relate to honesty, transparency, and compliance with the law. In most countries, the set of them is similar:

• act within the company's charter and not abuse their authority;

• work “for the good of the company,” thinking not only about quick profits, but also about people, the community, and the future;

• use their own judgment, not just the advice of others;

• act as cautiously and professionally as a “smart manager” would;

• avoid conflicts of interest and “gray schemes”;

• no bribes or gifts “under the table”;

• If you have a personal interest in a deal, honestly disclose it to the board.

These responsibilities of directors form the basis of corporate governance in any country. Violations can result in fines, compensation for damages, or even loss of the right to be a director. 

Types of Company Directors

Not all directors are the same, some are in the thick of things every day, making sure the business actually runs. Others mainly show up for board meetings, give advice, and keep an eye on the big picture. And some don’t even have an official title but still have a big influence behind the scenes.

Executive vs Non-Executive Director

Executive directors are the hands-on team. They work full-time in the company like Finance or Operations Directors and sit on the board too. They handle day-to-day stuff and make sure the board’s big plans actually happen.

Non-executive directors act more like advisors.. They usually work part-time, don't run the day-to-day business, but bring a fresh voice to meetings. Their job is to ask the tough questions, disagree with proposals, and keep the business on track. 

While they do different things on a daily basis, in the eyes of the law, they're equal in responsibilities and subject to the same rules.

Shadow and Nominee Directors

Some directors do not fit the “classic” model, but are still legally valid.

Nominee directors are officially appointed to represent the interests of someone else, usually a major shareholder or investor, based on a power of attorney. They may be biased toward that party, but legally they are required to perform the same duties as all other members of the board of directors. They are typically used to preserve the confidentiality of the company's owners.

Shadow directors are a more complex case. They are not officially appointed, but if the actual directors regularly follow their instructions, the law considers them to be directors. This means that they may also be held liable.

Independent Directors

Independent directors are non-execs with no axe to grind, no significant shareholding, no family ties to the management, no ulterior motive.

Since they are truly objective, they are viewed as a gigantic governance boon. They bring balance, counter management's influence, and render boards more effective. That is why in most countries, listed companies are encouraged (and even required) to have a majority of independent directors in their boards.

Why Directors Are Important for a Business

Apart from strategy, directors instill trust-their experience helps to gain investors, partners, and talent for the company, while they also influence the culture and ambiance of the company and its reputation.

Role in Governance and Compliance

Directors are the “guardians” of order. They ensure that the business complies with all relevant laws and internal policies, from tax legislation, employment legislation and all other legislations in the jurisdictions that it operates. 

Through approving reports, audits, and compliance checks, directors defend not only the integrity of the company but also the interests of stakeholders. In public companies and regulated industries, their oversight is even more critical.

Impact on Company Growth and Reputation

Appointing directors has a direct impact on a company’s growth and reputation. Good decisions open markets and build trust, poor management can cause losses.

An experienced director brings with him knowledge, while with good knowledge and contacts, he can open doors for the company, where before there were none.

FAQ – Company Directors Explained

What is the legal definition of a company director?

In short, a company director definition is a person who has the right to make decisions on behalf of the business and is responsible for its direction. Another way to define director of a company is as an individual who represents the company legally and strategically.

What are the main duties of directors?

• act honestly and within the scope of your authority;

• work for the benefit of the company, not yourself;

• make independent decisions;

• avoid conflicts of interest;

• do not accept bribes or “gifts”;

• disclose your interest in transactions.

Can anyone become a director?

Almost any adult, unless prohibited by law. Minimum age: 16 in the UK, 18 in other countries. Prohibited for bankrupts, fraudsters, and those deemed unfit to serve as a director by a court of law.

Are directors liable for company debts?

Usually, no. The company's debts do not affect the directors' personal finances. However:

• if they have signed a personal guarantee;

• if they have violated the law or their duties (fraud, trading while bankrupt).

In a normal company, the risks for a director are minimal.

What is the difference between a manager and a director?

Who are directors? They are responsible for defining the strategy and overall direction of the company, while managers implement this strategy in their day-to-day activities.