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What’s the Difference Between a Chairman and Director?

What’s the Difference Between a Chairman and Director?

What is the difference between a chairman and a director? Find out more by reading the rest of this article.

14th April 2021
Reading Time: 2 minutes

This article examines the difference between a chairman and a director. First we will explore the role of a chairman. Next, we look at the responsibilities of directors. Finally, the article will analyse the difference between a chairman and a director. Read on to find out what the main differences are.

What is a chairman?

Usually the role of the members in a company is defined in the Corporations Act 2001 (Cth). However, the Act does not define the role of a chairman. The chairman is an individual who is elected to be responsible over the board of directors as well as control and lead meetings. The role of the chairman can differ between companies, however they have quite a few responsibilities. These include:

  • Setting the meeting agenda
  • Make sure meetings are run correctly and efficiently
  • Having a strong say in any decisions made by the board
  • Represents the board to the CEO
  • Seeking a general consensus from the board when coming to a decision

What is a director?

A director is an individual chosen to represent the shareholders of a company. There can be more than one director which results in a board of directors. Before an individual can become a director, they must sign a Consent to Act as Director. Further, there are some rules regarding who can become a director and what responsibilities must be upheld. If your company is an Australian proprietary company, there must be at least one director. This is a requirement under the Corporations Act 2001 (Cth).

The Corporations Act 2001 (Cth) has a list of the duties of a director. They include legal and other responsibilities such as:

  • Acting in good faith
  • Proper use of position
  • Proper use of information
  • Acting with care and diligence

To find more extensive information on the duties of a director, click here.

What is the difference between a chairman and a director?

So, what is the difference? Ultimately, a chairman leads the board of directors. They will provide guidance and assume to be the leader. Whilst both the chairman and directors have extensive roles in running a company, there are some differences. Both belong to the overall board of directors, however the chairman is considered to be in a higher position of leadership.

Ultimately, the chairman is in charge of the board of director and is the person that the directors would go to for any decisions regarding changes to the business. Thus, the main difference between a chairman and a director comes down to the responsibilities they each have as well as the level of seniority in the company. Chairmen are often above directors in terms of responsibilities as well as accountability to do certain things in the company.

Concluding thoughts

Thus, although both the chairman and a director have senior positions in a company with a number of responsibilities each, there are a few differences. The chairman is a member of the board of directors and leads them. Essentially, the chairman is in a more senior position that the director. Therefore, the main difference is the position and responsibilities allocated to each title.

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Author
Mahima Bhindi

Mahima is an intern at Lawpath, and is currently studying a Bachelor of Laws degree with a major in Criminology at Macquarie University. Mahima has an interest in legal tech alongside cyber security and criminal law.