Company Directors - Owners or Managers?

Company Directors are critical cogs in making sure that The Company, one of the world's great inventions, works. Companies cannot function without company directors. In fact, they are one of the most important facets of the invention of a legal vehicle which bestows limited legal protections on the owners of the company. Smaller companies often have owner company directors - these are individuals who both work in the business and are controlling shareholders. In bigger businesses company directors tend to be separate from the dominant or largest shareholders - but not always.

In fact, there are now some serious discussions going on concerning the role of these two respective parties. It was reported in August 2003 for example, that FTSE 100 company directors cashed in £310 million during the past eight months by selling shares in the companies they run - a big increase over the same period a year ago. This illustrates how increasingly those who manage or direct the operations of the business are also having some sort of ownership stake. In this instance, despite falling profitability and weak share prices, hundreds of company directors are cashing in shares in their own firms. In fact, more than 700 individual share sales worth £309.9 million were carried out by company directors of FTSE 100 companies between 31 December, 2002 and 12 August 2003. The number of company directors selling shares in their companies has jumped 25 per cent since the same period last year, when 676 transactions valued at £251.27 million took place.

When company directors are also owners of publicly held companies their role can sometimes be confusing. A recent example is that of Lord Black who was embroiled in further controversy over his management of Daily Telegraph publisher Hollinger International when it emerged that he used $8m (£5 million) of company money to buy thousands of historical documents related to former US president Franklin D Roosevelt. As company directors go, the use of company funds by Lord Black to buy the papers is likely to put further strain on the relationship between him as one of the company directors and Hollinger's shareholders, some of whom staged an open revolt earlier in 2003

In emerging markets the role of company directors is also under scrutiny. In Russia, behind the huge economic achievements of the past five years lie difficulties of equal size. Very rich men (the so-called oligarchs) both own and run companies. The relationship between these company directors and the state is still to be crafted. Answers to these questions depend very much on the actions of the Russian President. The jury is still out on whether Mr Putin has the ability to promote further market-oriented reforms to encourage entrepreneurship outside the extractive industries, while at the same time curbing the influence of both the state bureaucracy and the oligarchs. It is a big challenge, as straightforward liberalisation may simply create more opportunities for existing company directors who are already disproportionately wealthy and powerful.

Across the world the role and responsibilities of company directors are under review. What was once a safe sinecure for the good, the great and the retired is under considerable scrutiny from those in the business community who say that company directors have not been taking their duties sufficiently seriously. In this environment any new any person choosing take up this vocation must ask: What does the future hold for company directors?