Home HR for SMEs What makes a good director? Setting the tone from the top…
Andrew Cockburn explores the characteristics of effective leaders
Recently, I was asked what the key ingredients are for a good board director.
After pondering this for quite a while, I realised the question is not as straightforward as you first might think. There are so many influencing factors to consider, such as size, complexity and sector of the particular company.
A director of a small start-up company may be very different to a director of a multi-national listed company, for example. And a good financial director may have very different qualities to a good HR director.
But I believe there are a few generic characteristics necessary for all good directors.
Good leadership skills
Firstly, it’s imperative they have good leadership skills. Directors should lead by example and set the tone from the top. They need the ability to manage the business as well as deal confidently with all stakeholders, including shareholders, employees, suppliers, customers, the wider community and the environment.
We need to remember that directors have the duty to exercise independent judgement – something which can be an issue when they’re either a shareholder or have been appointed to represent the majority or sole shareholder.
Being a team player
Secondly, good directors should be very good at being a team players. By the very nature of having a board of directors, all members need to be able to work together efficiently. They need to get along – especially since they’ll be spending lots of time together – and need to have trust and respect for their colleagues on the board.
A balanced board is ideally a mixture of abilities, knowledge and experience. Directors are jointly responsible for the running of the company – remember the phrase “No man is an island.”
While many boards may have one or more members with slightly more domineering personalities, all directors need to feel able to fully participate with the running of the company. Also bear in mind new directors coming onto the board. This can be an intimidating experience and needs to be managed accordingly.
Thirdly, as well as having good leadership skills and being a good team player, good directors will of course require some operational experience or sector expertise. This might be in one or all of the following:
• Financial matters (all directors require some degree of financial acumen)
• Industry knowledge
• Sector knowledge
• Operational experience
• Strategic thinking
It is also worthwhile to mention the codified directors’ duties, which can be found in The Companies Act 2006. These can be found in Section 170 to 176 inclusively.
While directors are busy running the business, these may seem rather ‘dry’ and not particularly relevant. However, they are anything but irrelevant.
Any breaches in fiduciary duties may result in disqualification and/or incurring personal liability so directors need to be fully aware of these duties as defined by the Act.
For advice on becoming a director, contact Andrew Cockburn, who is the Director at Oswalds. From its Edinburgh base, Oswalds, which is part of the Jordans legal group, specialises in company formations and support for start-ups and SMEs.