Directors
Anyone can become a director provided they are not an undischarged bankrupt and have not been disqualified by a court from holding a directorship. The companyçs articles may also require a share qualification.
A company when incorporated must have at least one director and a company secretary. The same person cannot be the sole director and company secretary.
Directors are typically chosen by shareholders at the AGM and are responsible to them for the operation control and maintenance of the business: company assets and resources. They must, to the best of their ability, provide the shareholders with a suitable return on investment.
The articles of association set out the scope and duties of directors. Typically medium to large companies have a group e.g. four to eight, each Director having an area of functional responsibility for operations. One is typically appointed as the Managing Director or Chief Executive who oversees and co-ordinates all operations. The Chairman chairs Board meetings and ensures that full reporting to shareholders is undertaken.
Directors are company agents and can make contracts on the companyçs behalf. Legal responsibilities include:
Directors may be:
Executive directors
who work full time for the company have functional management
responsibility for an area of the companyçs operations
e.g. Managing Director, Marketing, Operations, Finance,
Human Resources.
Non-executive directors
are usually engaged in a part-time or advisory capacity.
Often specialists, they may be former executive directors
or well regarded people who bring expertise or external
influence to the company/Board e.g. Nigel Lawson (a
national bank).
Company Secretary
Companies must have at least one Director and a company secretary (usually appointed by the Board) who may or may not be a Director. The company secretary usually reports to the MD. This is a professional role as the responsibilities involve important administrative functions often of a legal nature. The company secretary is responsible for submitting the audited accounts to the Registrar of Companies and has the legal authority as a company agent to make contracts on the companyçs behalf.
Management and Employees
Executive directors take responsibility for the running of designated functional areas of a company. In sizeable companies, the process of delegation enables directors to appoint others. Delegation means devolving responsibilities to subordinates ( second and third tier managers with other staff reporting to them) enabling the required work to be done. Sub-ordinate staff are accountable for carrying out delegated roles and duties but the primary responsibility rests with the Directors. The formal processes of job appointments and definition enable the Directors to authorise staff reporting to them to take action on their behalf.
An understanding of these concepts of primary responsibility and accountability are important. They provide for example the context for the formation of and delivery of employment contracts.
