Board Roles: Understanding the Various Types of Directors

Types of Directors

1. Alternate Director

These directors are appointed by an existing director to exercise their powers for a specified period, often in case of absence due to reasons like illness or long holidays​​

2. Chair

The chair, (also known as a chairman or chairwoman) is responsible for leading board meetings and often, member meetings. The chair plays a key role in setting meeting agendas, reviewing draft minutes, and acting as the primary communication link between the board and CEO. They guide the board in creating governance structures and in certain situations serve as the organisation's principal spokesperson.

3. De Facto Director

Individuals who, although not formally appointed, act in the capacity of a director. For instance, a consultant performing directorial tasks could be considered a de facto director​​.

4. Executive Director

Executive directors wear dual hats - as senior executives (employees) and as directors on the board. Their deep understanding of the business and technical skills are valuable to the board. However, as non-idependent directors it is important to note that their day-to-day closeness to the business can influence their decision making.

5. Non-Executive Director

In contrast to executive directors, non-executive directors are not employees of the organisation. They bring an objective, birds-eye perspective and independence, crucial for acting in the organisation's best interests. They rely on information from the management team to make informed decisions​​.

6. Independent Director

These are a subset of non-executive directors, free from any business or other relationships that could interfere with their ability to exercise independent judgment​​.

7. Lead Director

Mainly found in the US as well as some Australian companies, a lead director is usually an independent, non-executive director. They undertake roles of the chair, especially in the case where a chair's executive role, such as CEO, may lead to conflicts of interest​​.

8. Managing Director (MD)

An MD, often but not always synonymous with CEO, is an executive director with the ultimate authority to manage the organisation on a day-to-day basis. They oversee operations, implement strategies, and are responsible for creating a suitable corporate culture​​.

9. Nominee Director

Appointed by a shareholder, creditor, or interest group, nominee directors maintain a loyalty to their nominator. They are expected to act in the best interests of the company, balancing this with their loyalty to the nominator​​.

10. Shadow Director

These are individuals not formally appointed as directors but whose instructions the board members customarily follow. Shadow directors owe the same duties to the company as formally appointed directors​​.

Conclusion

Each type of director plays a unique role in shaping the governance and strategic direction of a company. It is important to note that many of the above roles are not obligatory to a board, and different organisations have unique needs and processes. Understanding these roles provides insight into how decisions are made and who influences these decisions within an organisation. This knowledge helps in assigning the right responsibilities to the appropriate roles, ensuring the organisation's goals are met efficiently and ethically.