Ten Top Tips: 10 new director FAQs

With all the new regulations to get their heads around, being a new director is hard work. The IoD's Dr Roger Barker answers some of the most commonly asked questions.

by Dr Roger Barker
Last Updated: 09 Oct 2013

From Greg Dyke at the Football Association to Mark Carney at the Bank of England, a slew of high-profile figures are about to take up directorial roles at major British institutions. With new rules and regulations to handle on top of their new responsibilities, things can get confusing, says IoD head of corporate governance Dr Roger Barker. Here, he answers the 10 most frequently-asked questions.

1. What does the term ‘fiduciary duty’ mean?

It is a legal and statutory requirement for a director to put the interests of the company first.  

2. Are directors’ duties legally binding?

The seven duties in the Companies Act are legally binding.

3. Where does a director’s authority come from?

Not just from the title; it’s worth remembering that directors are appointed, not anointed.   Authority comes from the company’s Articles of Association, with which you should familiarise yourself.

4. What does it mean for directors to ‘act within powers’?

Being a director doesn’t give you superpowers, although it’s surprising how some people get confused. Directors must act according to the company’s constitution and in the best interests of the company. Issuing shares to old school chums to keep voting control in ‘friendly hands’, for example, is a no-no.

5. In whose interests do directors act?

You must act to promote the success of the company for the benefit of shareholders, but you must also take stakeholder interests into consideration. Essentially, directors shouldn’t lose sight of the company’s impact on the wider world it operates in.

6. What does ‘exercise independent judgement’ mean?

You must act in the best interests of the company, even if you’ve been put there by a shareholder (say, a private equity company) to ‘safeguard their interests’. There is no such thing as a plant in a boardroom. Apart from those in pots.

7. Do you need to be trained to be a director?

No – which is perhaps surprising considering the many legal responsibilities. But the law does require that you have the general knowledge, skill and experience that might be reasonably expected of a director. And training certainly helps.

8. Must I declare conflicts of interest?

Yes, all of them, including ‘potential’ conflicts.   

9. What about director perks? Days on the golf course...?

Ahem. Most have long since gone. You can only accept a ‘benefit’ from a supplier if it won’t give rise to a conflict of interest. There are certain provisions for corporate hospitality, however – for those dedicated to the art of sinking one at the 19th hole.  

10. I want to shake things up round here – can I bring my brother/cousin in as a consultant?

 By all means if you think they can do the job, but, again, you must advise the board of any interests you have within a proposed transaction.

- If you want to know more about training to be a director, take the test at www.iod.com/knowledge.

- Image: Flickr/Center for Jewish History, NYC

Find this article useful?

Get more great articles like this in your inbox every lunchtime

The questions to ask when everything is unknown

Systemic intelligence is an indispensable skill for business leaders.

How to stop your culture going back to normal after COVID

In this video, Capita's Melanie Christopher and Greene King non-exec board director Lynne Weedall discuss...

This isn't just a health crisis, it's an equality crisis

Inspiring Women in Business winners: In the “new normal”, we must make sure that female...

How to build an anti-racist business

You don't need a long history of championing equality to make a difference.

What are Simon Roberts’ big 3 challenges at Sainsbury’s?

The grocer's new CEO has taken the reins at a critical time.

Should CEOs get political?

The protests that have erupted over George Floyd’s murder have prompted a corporate chorus of...