Managing Director

What is a managing director?

Definition of managing director

The task of the managing director is to handle all transactions relating to the company. The tasks can also be divided between several managing directors. For example, one managing director can take on the commercial management and another the technical management.

The management also represents the company externally. The exact powers it has depend on the company’s legal form.

In a stock corporation, for example, the Management Board is the body that has the authority to manage the company. The supervisory board monitors this. In a GmbH, on the other hand, the managing director is subject to the instructions of the shareholders. As a rule, a managing director is appointed for a certain period of time and receives an employment contract in which the managing director’s salary is specified.

What tasks does a managing director have?

The task of the managing director is the successful management of a company. This includes the strategic and operational business. Among other things, he is responsible for the smooth running of day-to-day business. He is also responsible for the strategic direction. The managing director is the highest decision-making authority in the entire company.

Its tasks include the following:

Strategic planning

A managing director is responsible for the medium and long-term direction of the company. This includes identifying opportunities and risks on the market, changing framework conditions, defining corporate goals and setting and monitoring the implementation of the corporate strategy.

Manage finances

A managing director is responsible for the company’s short, medium and long-term financial situation. This means that they must monitor the current cash flow, the capital structure and the profitability of the company and intervene if necessary.

Personnel management

As the highest decision-making authority and the highest-ranking manager, the managing director must define and shape the company’s personnel and management culture. All other managers are usually guided by the behavior of the managing director.

Risk management

As a managing director, new market opportunities and market risks must be analyzed and reviewed on a regular basis. Systems, methods and processes should ensure that the company is not threatened by risks but can benefit from opportunities.

Products & Services

As an effect of the strategy, a managing director often also has an influence on the company’s products and services. The managing director is also responsible for developing, improving and marketing these.

Corporate culture

One of the core tasks of a managing director is to define and develop the corporate culture, i.e. the way in which all employees work together. This is the only way to produce smooth and problem-free processes, products and services.

Representation of the company

As the highest decision-making body of a company, a managing director must also represent and represent the company in public. However, this also applies in court and in public, e.g. at events.

What powers does a managing director have?

As can be seen above, the managing director has a very wide range of responsibilities. He also has a number of important powers. These include the following:

• Company meeting convened
• Create tax documents
• Duty to provide information to other shareholders
• Formal powers, such as registration in the commercial register

What liabilities must managing directors assume?

It should be noted that he is not liable for every business decision. The management is only liable for conduct that is in breach of duty and/or illegal. A distinction is made here between liability in the external relationship and liability in the internal relationship.

Liability in the external relationship

In some cases, he is even liable with his private assets. This happens, for example, if they fail to meet their obligations to social security institutions or tax authorities or do so late. This also applies to other statutory payment obligations of the company.

Liability in the internal relationship

If the managing director breaches his duty of care, he is liable. This therefore means that he has breached a duty of care. This may give rise to claims for damages.

What is a management regulation?

Rules of procedure are often used for corporations such as limited liability companies with several managing directors. The rules of procedure regulate the measures for which the management must obtain the approval of the shareholders, the owners of the company. This provides managing directors with a clear set of rules as to where they are allowed to make decisions.