The specific definition of a director — as well as a director’s duties — differs from organization to organization. A small business may have different needs than a large corporation, resulting in different director duties. But in every case, a director manages a business based on established rules and policies.
There are a lot of things a director could be responsible for. In some companies, each department or segment of the company — such as the marketing or sales department — has its own director. Here are a few things that a director might do:
This role can also be fluid, meeting the needs of the company as they arise.
In a limited liability company, the owners are the members. In a corporation, owners are shareholders. Depending on the policies of the business, a director could have an ownership interest in the business, but it is not necessary.
Not everyone is leadership material. There are some important characteristics that a director should have:
Directors have a lot to think about, which means they have to be willing to fill whatever role is needed.
Though there is no one structure for a business, generally a director has authority over managers. A director oversees management teams. Some organizations may consider this at the executive level. In most cases, vice presidents manage directors, and chief executives oversee vice presidents. Mid-to-large businesses often have a chief executive officer (CEO) who oversees the highest level of management.
The size and scope of the business and type of legal entity often dictate what roles are necessary for the company to operate. An early start-up may not be ready for a full suite of executives and management, while a large established business may have multiple directors and upper management employees.
There are a number of benefits of having a director or multiple directors in place. Having big-picture oversight of management executions can help keep everyone on task. A director is a person able to communicate the roles of managers and other employees to executives, board members, investors, and others. This can lead to greater organizational success.
There are very few situations where having a director in place would be a disadvantage. In some cases, the business may not be large enough to need director oversight. There may not be enough employees to justify multi-level management. Putting someone in an upper management position just to fill a title could result in unqualified leadership.
In a broad sense, the definition of a director is someone who oversees managers and other employees within a company. They may wear many different hats depending on the size and scope of the business.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.