Types of directors in UK companies

Managing Director or Director?

The structure of a business can sometimes be quite difficult to understand. Knowing the different types of Directors amongst the variety of different titles which exist can help avoid the confusion as to what that job title means.

Types of executive directors

Director

Whilst there are legal subtleties that can vary this, in general terms a Director is a member of the board running the company and therefore one of a small number of people who contribute to making the big decisions for the company.

Note that they ALL take full legal responsibility for all the decisions of the company. In the eyes of the law, all directors are equally responsible.

They are not, when meeting as directors in a board meeting, responsible just for their department.  They are all responsible for protecting the interests of the WHOLE company.

Executive Director

The term Executive Director is usually taken to mean a Director that is also employed full time by the company to run some or all of the business day to day.

They often head a specific function within the company so their title may be Finance Director, Sales Director or Operations Director.

Managing Director

A Managing Director is essentially the senior full time executive within an organisation. Managing Directors manage the company day to day under the direction of the board. Their tasks include decision making, managing, and executing strategic direction.

A Managing Director also leads the responsibility of communicating company messages at a high level, including discussions with press and media.

This communication responsibility also extends to the organisation’s staff, as the Managing Director also needs to motivate the team and direct the management to get the most out of the team while maintaining company morale.

Chief Executive or CEO

The term chief executive has no specific legal meaning and although sometimes there are subtle differences, is usually roughly synonymous with Managing Director.

Types of non-executive directors

Non-Executive Director

A Non-Executive Director is a member of the board of directors that is not usually involved in managing the day-to-day running of the company. Non-executive directors are sometimes investors, and are usually very experienced directors with a broad background that can provide useful advice and guidance on various business issues.

Despite their part-time nature, as a director, non-executive directors have all the same powers and duties as a full time director.  They have an active role in determining company strategy, and should also be monitoring performance – especially in the more senior levels of the organisation. Non-executive directors often also cast a watchful eye over company finances, identifying potential risk areas and developing a strategy that will improve the organisation’s performance year on year.

Chairman

The term Chairman refers to the person who chairs board meetings.  Inevitably also a director, the chairman is usually a non executive director, although they can be an executive director, in which case the term Executive Chairman is sometimes used. 

Their role is typically twofold:

In legal terms they are simply the director charged with managing the board of directors and ensuring it operates effectively. 

In practice they are also usually the director most involved with liaison with investors on behalf of the director team as a whole.

Summary of the types of directors found in UK business

Understanding the different types of Directors found within an organisation should help prevent confusion.

In essence, all directors are responsible for the running of the company.  Executive Directors are actively involved in an organisation day-to-day and are led by the Managing Director as they do so. They lead the employees within an organisation, manage processes and direct the work.

Non-executive directors are much less hands-on, but share equal responsibility with all directors for company strategy and decisions.

A non-executive director will usually have a good business track record themselves and and can provide essential advice to those working within the organisation.