What makes a good director?

Recently, I was asked what the key ingredients are for a good board director. After pondering this for quite a while, I realised that this is not as straightforward a question as would first appear. There are so many influencing factors including 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. A good financial director may have very different qualities to a good HR director.

Firstly, it is imperative that 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, i.e. shareholders, employees, suppliers and customers, the wider community and environment. It needs to be remembered that directors have the duty to exercise independent judgement which can be an issue where either they themselves are a shareholder, or they have been appointed to represent either the majority or sole shareholder.

Secondly, good directors should be very good at being a “team player.” 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, as they will 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 and severally responsible for the running of the company – remember the phrase “No man is an island.” Whilst 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. Bear in mind also new directors coming onto the board. This can be an intimidating experience and needs to be managed accordingly.

Thirdly, in addition to having good leadership skills and being a good team player, good directors will of course require some operational experience or sector expertise. This may be in some or all of the following:

• Financial matters (Not just for the CFO or FD of the company.  All directors require some level 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. Whilst 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 by directors may result in disqualification of the director and/or the director incurring personal liability so directors need to be fully aware of these duties as defined by the Act.