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Differences between directors and managers

26 Mar 2017

There are many fundamental differences between being a director and a manager. It’s not simply a trivial matter of getting a new job title and a bigger office.

The differences are numerous, substantial and quite onerous. The table below outlines the major differences between directing and managing.

Leadership Directors Managers
Leadership It is the board of directors who must provide the intrinsic leadership and direction at the top of the organisation; establish and maintain its vision, mission and values It is the role of managers to carry through the strategy on behalf of the directors.
Decision making Directors are required to determine the future of the organisation, its strategy and structure and protect its assets and reputation. They also need to consider how their decisions relate to ‘stakeholders’ and the regulatory framework. Stakeholders are generally seen to be the company’s shareholders, creditors, employees, customers, and increasingly, a community in which it operates. Managers are concerned with implementing the decisions and the policies made by the board.
Duties and responsibilities Directors, not managers, have the ultimate responsibility for the long-term prosperity of the company. Directors are required in law to apply skill and care in exercising their duty to the company and are subject to fiduciary duties. If they are in breach of their duties or act improperly, directors may be made personally liable in both civil and criminal law. On occasion, directors can be held responsible for acts of the company. Directors also owe certain duties to the stakeholders of the company as listed above. Managers have far fewer legal responsibilities. See factsheet:

‘What are the duties, responsibilities and liabilities of directors?’

Relationship with shareholders Directors are accountable to the shareholders and other stakeholders for the company’s performance and can be removed from office by them, or the shareholders can pass a special resolution requiring the directors to act in a particular way. Directors act as ‘fiduciaries’ of the shareholders and should act in the best interests of the company (as a separate legal entity). Managers are usually appointed and dismissed by directors or management and do not have any legal requirement to be held to account.
Ethics and values Directors have a key role in the determination of the values and ethical position of the company. Managers must enact the ethos, taking their direction from the board.

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