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All about Company's Directors

The term 'Director' refers to a rank in management of the company. A director is a person who leads or supervises a certain area of private or public limited company. Companies that use this title often have more than one director spread throughout for different functions of the company.

CA Kapil Goel

The term ‘Director’ refers to a rank in management of the company. A director is a person who leads or supervises a certain area of private or public limited company. Companies that use this title often have more than one director spread throughout for different functions of the company. In companies with more ranks within director, the next rank is usually Executive Director. Large companies also have Finance Director and Non-Executive Directors. In companies, the director usually reports directly to a Vice President or CEO of the company.

Executive Director

The role of the Executive Director of the company is to design, develop and implement strategic plans for the benefit of their organization in a cost-effective and time-efficient manner. The Executive Director of a company is also responsible for the day-to-day operations of the organization, including managing committees and staff and developing business plans in collaboration with the board of directors for the future of the organization. In nutshell, the board grants the Executive Director the authority to run the organization. The Executive Director is accountable to the Chairman of the Board and reports to the board on a regular basis whether it is quarterly, semiannually, or annually. The board may give some suggestions and ideas about how to improve the organization, but the Executive Director decides whether or not, and how to implement these ideas. The Executive Director of a company have a leadership role for an organization and often fulfills a motivational role in addition to only office-based work. Executive Directors motivate and mentor members, volunteers, and staff of the companies, and may chair meetings. The Executive Director leads the company and develops its organizational culture. As the title suggests, the Executive Director needs to be informed of everything that goes on in an organization. This includes staff, members, budget, company assets, and all other company resources, to help make the best use of them and raise the organization’s profitability and profile.

Finance Director

The Finance Director is a corporate officer mainly responsible for managing the financial risks of the organization. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management of the corporation. In some sectors the Finance Director is also responsible for analysis of company’s data. The title is equivalent to Chief Financial Officer(CFO) or Chief Financial and Operating Officer(CFFO). The Finance Director  typically reports to the chief executive officer and to the board of directors, and may additionally participate in the board. The Finance Director supervises the finance unit and is the chief financial spokesperson for the corporation. The Finance Director directly assists on all strategic and tactical matters of the organization as they relate to budget management, cost benefit analysis, forecasting needs and the securing of new funding.

Non- Executive Director

A non-executive director or outside director is a member of the board of directors of an organization who doesn’t form part of the executive management team. They are not employees of the corporation or affiliated with it in any manner and are differentiated from other inside directors, who are members of the board who also serve or previously served as executive managers of the company. Non – executive directors are sometimes considered the same as an independent director but there are some difference between them that non-executive directors are allowed to hold shares in the company while independent directors are not.

Non-executive directors have responsibilities in the following areas, according to the Higgs Report published by the British government in 2003 :

  • Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy of organization.
  • Performance: Non-executive directors should check the performance of management team in meeting agreed goals and objectives and monitoring and where necessary removing senior management, and in succession planning.
  • Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
  • People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and where necessary removing senior management, and in succession planning.

Chief Executive Officer

A Chief Executive Officer is the highest-ranked corporate officer (executive) or administrator having charge of total management of a corporation. An individual appointed as a CEO of a company typically reports to the board of directors. The terms often used as synonyms for CEO including managing director (MD) and chief executive (CE). The duties & responsibilities of an organization’s CEO or MD are set by the organization’s board of directors or other authority, depending on the corporation’s legal structure. Typically, the CEO/MD has duties of a director, decision maker, leader, manager and executor. The communicator role can involve the press and the rest of the outside world, as well as the organization’s management and employees; the decision-making role involves high-level decisions about policy and strategy. As a team leader of the corporation, the CEO/MD advises the board of directors, motivates employees, and drives change within the organization. As a manager, the CEO/MD presides over the organization’s day-to-day operations.

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Categories: Company Law

View Comments (1)

  • In para 1, you have mentioned the director usually reports directly to Vice President or CEO - this does seem to be correct.

    Also there is a contradiction under CEO - " an individual appointed as CEO of a company typically reports to the board of directors"

    Please clarify the correct position - Thanks

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