Managing Director Meaning, Appointment Power, Duties and Responsibility

10/07/2020 1 By indiafreenotes

A managing director is someone who is responsible for the daily operations of a company, organization, or corporate division. In some countries, the term is equivalent to CEO (Chief Executive Officer) the executive head of a company. In other countries, managing directors primarily work as the heads of individual business units within a company rather than heading up the company as a whole. As a member of senior management, the managing director is also expected to keep a company solvent and to promote expansion and innovation within the industry.

An analysis of the definition shows that:

(i) The managing director must be an indi­vidual

(ii) He must be a member of the Board of Directors

(iii) He must be appointed by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Di­rectors or by virtue of its Memorandum or Articles of Association

(iv) He is entrusted with substantial power of management

(v) He is not entrusted with powers of rou­tine nature

(vi) He shall exercise his powers subject to superintendence, control and direction of its Board of Directors

Appointment of Managing Director

A managing director is appointed by the Board of Directors subject to the approval of the Central govt. He is appointed at the first instance for the period of five years which can extend for a period of another five years.

The appointment of a person as managing director in a public or its subsidiary private company shall not have effect unless it is approved by the Central Govt. In case of a new company, the approval must be made within three months of his appointment.

The Central Govt. shall not accord its approval unless it is satisfied that:

(i) It is the interest of the company to have a managing director,

(ii) The proposed incumbent is a fit and proper person for such appointment,

(iii) His appointment is not against public interest,

(iv) The terms and conditions of the appoint­ment of the proposed managing director is not against public interest.

If his appointment is not approved by the Central Govt., the incumbent must vacate his office from the date of receipt of the disapproval of the Govt.

Power of Managing Director

To have the power to administer the operations of the Company pursuant to policies, law, objectives, Articles of the Company, resolutions of the meeting of shareholders, resolutions of the Board of Directors, resolutions of the Executive Committee, as well as relevant regulations and procedures.

  1. To have the power to issue orders and carry out any act as necessary and appropriate in order to satisfactorily carry out the functions under article 1., and in the case of an important matter, a report shall be made and/or notice shall be given to the Board of Directors and/or the Executive Committee.
  2. To consider the recruitment, appointment, transfer, removal, including appraisals and disciplinary measures, as well as to determine remuneration and welfare benefits of employees. In any event, any action taken must not be contrary to or inconsistent with the authority of the Executive Committee.
  3. To have the power to issue regulations on the Company’s operations, such regulations not being inconsistent with or contrary to the policies, articles, regulations, rules, orders and resolutions of the Board of Directors and/or Executive Committee.
  4. To grant and/or delegate powers to other persons to perform specific tasks on behalf of the Managing Director.
  5. To promote and develop adherence to good conduct, legal compliance, ethics and culture in the Company’s business operations while observing good governance principles.
  6. To carry out any other act as entrusted by the Board of Directors and/or Executive Committee.
  7. Any question or ambiguity arising from the exercise of such powers shall be submitted to the Board of Directors for determination.
  8. The above powers of the Managing Director shall not be exercised in the event of the Managing Director’s having a potential personal interest in or a conflict of interests of any character with the Company.

Duties and responsibilities of the managing directors are:

  1. As a member of the Board of Directors he participates in formulating the objectives and policy-making functions of the Board.
  2. To execute policies laid down by the Board of Directors.
  3. He is the liaison officer between the Board of Directors and the rest of the organization.
  4. To interpret and communicate policies of the company to subordinate employees.
  5. To review the operations of the company and present to the Board periodically accounts and statistics showing the progress and the present po­sition of the company.
  6. To formulate the employment and compen­sation plan in accordance with the accepted poli­cies of the company.
  7. To appoint high officials of the company.
  8. To plan the development and expansion of business.
  9. To organize meetings with department heads.
  10. To promote high morale among the employees of company by creating a sense of belonging.
  11. To maintain contact with the govt., chamber of commerce, trade unions and community at large.
  12. To maintain a harmonious relationship between line and staff managers.
  13. To approve or disapprove development plans submitted by the senior executives and place before the Board for final approval.
  14. To establish a system of budgetary control by which the actual performance of the company may be evaluated against the planned course of action.
  15. To administer production and sales activities of the company.
  16. To give due attention to consumer satisfaction which is ensured by the continued supply of goods and services to the market.