Director development and constant professional improvement is often associated with something only large corporates should, or are, doing. Very rarely do smaller businesses consider this as necessary.
All the answers to your unique business lifestage questions
Directors are in control of the affairs of companies on a day-to-day basis, and if you want the best for your business, your directors should always aim to be the best they can be. So, it is crucial that they remain fully cognisant of two fundamental principles:
- Where does the power truly lie?
- How are decisions derived at?
In terms of elaborating on point one above. Directors manage the day-to-day business and affairs of the company. Shareholders, on the other hand, are responsible for more pressing decisions generally affecting their investment in the company itself.
Related: To contract month-to-month or rather engage them full-time?
Shareholder decisions are divided into ordinary and special resolutions, depending on the nature of the issue at hand. Special resolutions require a higher percentage of support from those shareholders who hold voting rights on the subject matter at hand. As such, these generally deal with more pressing issues.
It is therefore important that a separation of director and shareholder roles are always maintained and when decisions need to be made – it is referred to the correct decision-making body where the power correctly lies. It is also crucial that the company’s founding documents and related agreements clearly outline this.
In terms of how the decision is derived at, this is about the process followed and the methodology applied in reaching a decision. This is where board policies and corporate governance becomes vital, in addition to following the correct process in reaching a decision.
In both instances, it is important that best practice is observed by directors and adjustments constantly made to align. This means policies and agreements must constantly reflect these adjustments.
Related: Want to exit the company? Here’s your shareholder exit strategy
In addition, it is important that the following skills are also regularly improved:
- Awareness – Directors should know what is going on in the business and market place.
- Independence and Objective thinking – To ensure decision making is always underpinned by these principles.
- Scepticism – Directors should question the authenticity and accuracy of any information received.
- Teamwork – To ensure that clarity is always maintained by holding the view that all work done is needed in order to effectively manage the affairs of the company.
Ongoing leadership development is therefore not only a suggestion for directors in large companies – it’s an imperative for all directors.