A Company Director’s Role

A company director’s role is the most crucial for the smooth operation of the company. He is perhaps the busiest person in the entire organisation with several decisions to be made, pressure from competitors, and undoubtedly everyone looks up to him for a relaxed smile at least when he/she is in office.

We don’t live in a vacuum or work in isolation. Even in this high-paced technical world, we are always communicating in some way. Since so many of our waking hours are spent working, a great deal of our lives are spent interacting with co-workers, clients and customers. A company director is expected to ensure the right amount of effective communication at all levels.

The directors are responsible for the management and good governance of the company. While their powers can be restricted by the company’s articles they can, in most cases do anything that the company can do. With these powers, come responsibilities.

Since the directors can act as and for the company, they must ensure that the company does everything that it is obliged to do by law and that the decisions they make are in the best interests of the company.

In this context the interests of the company are those of the shareholders as a whole.

These may be different from the interests of customers, employees, individual shareholders or the directors themselves.

Except where powers are delegated to a committee of directors or to a managing or executive director, the directors act collectively as a board. Individual directors do not have the authority to commit the company unless authorised by the board.

A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director (see qualifications for directors). Directors act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the company’s articles of association.

As the company’s agents, they can bind the company with valid contracts entered into with third-parties such as buyers, lenders, and suppliers (see powers of directors).

Directors are the trustees for the firm and not for individual stockholders, but they may be sued by the stockholders as personally liable for the consequences of the acts that are fraudulent or beyond their vested powers.

Also, whether appointed validly or not, they are individually and collectively liable for the acts and/or negligence of the firm. (See liabilities of directors).

Unlike stockholders, directors cannot vote by proxy and, unlike employees, cannot absolve themselves of their responsibility for the delegated duties (see duties of directors). See also director.

In overall, a company director has to delegate responsibility to senior staff members, frame the company’s policies and set targets and deadlines, all the while monitoring the budget for a fiscal year.

The ability to use effective interpersonal skills helps you build not just better relationships with others, but makes working with them more enjoyable.

The Company director’s role in company growth

With responsibility come attitudinal and behavioural changes. To feel confidence out of competence is important. To contribute to the value stream of the organisation and, above all, to contribute actively at Board or Functional meetings, is of paramount importance. It is a pity where I have seen several directors as ‘passengers’ at meetings. They hardly open their mouths except to sip tea/coffee or to pull in a puff of tobacco smoke. Time is opportune to have a Director Orientation Programme so that all elected directors will be able to understand full well, their role and responsibility.

The attention of boards of directors is swinging away from oversight back to where it should be focusing on company growth.

A recent McKinsey survey (The View From the Boardroom, March 2005) supports this shift in concluding that one-third of the company directors surveyed want to spend significantly less time on audit and compensation issues.

Many directors have expressed a desire to become more involved with their company’s strategic growth planning. The McKinsey study found that 75 percent of the directors surveyed want to spend at least a quarter of their board time dealing with the company’s business strategy, its risks, and maximising growth opportunities.

Though just one survey, these conclusions support what many of us see in the boardroom every day: The pendulum of topics commanding directors’ attention is swinging from oversight and compliance back to where it should be focused on the company’s growth plans.

Boards do their jobs best when challenging the CEO to grow revenue, asking questions, and vetting the strategic plan. That’s how directors increase shareholder value.

Anybody is entitled to know who the directors of a company are. They are also entitled to know whether a director holds, or has recently held, directorships of other companies.

This information should be shown in the company’s register of directors and secretaries, on the form 288a notifying the appointment of a director and on the annual return. (Other directorships are not currently pre-printed on the annual return form).

A company director also needs creativity, hard work, leadership and a dozen of other traits to rise above the competition.

We are fortunate that we have some of the successful company Directors and many more are made within fast paced growing companies.

We have all heard of Bill Gates for his innovation and all the magic through Microsoft but little do we know of him as the Company Director Berkshire Hathaway which is the eighth largest public company in the world. He is a company director to this investment company headed by his long-time friend Warren Buffett.

Steve Jobs is one such who has recently decided to resign from his office and humbly states in his letter of resignation “I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know.” Unfortunately, that day has come.

This stresses on the importance of a director’s role and Steve Jobs would undoubtedly leave behind a lasting legacy and words as above will always leave footprints in the heart.

Above all else, Directors should live their organisational lives in such manner that staff would see them as ‘role models’ to emulate.

(Nalin Jayasuriya is the Managing Director & CEO, McQuire Rens & Jones (Pvt) Ltd. He has held Regional responsibilities of two Multinational Companies of which one, Smithkline Beecham International was a Fortune 500 company before merging to become GSK. He carries out consultancy assignments and management training in Dubai, India, Maldives, Singapore, Malaysia and Indonesia. Nalin has been Consultant to assignments in the CEB, Airport & Aviation Services and setting up the PUCSL. He is a much sought-after business consultant and Corporate Management Trainer in Sri Lanka. He has won special commendation from the UN Headquarters in New York for his record speed in re-profiling and re-structuring the UNDP. He has lead consultancy assignments for the World Bank and the ADB. He has addressed the Indian Chamber of Commerce, Selangor on several occasions and addressed the Marketing Institute of Singapore. Nalin is an executive coach to top teams of several multinational and blue chip companies.)