Managing directors · the role
What does a managing director do?
The short answer · updated
A managing director (MD) is the most senior executive running a company day to day. The MD turns the board’s strategy into plans and budgets, leads the management team, answers to the board for the company’s results and represents it to customers and suppliers. An MD is usually also a director of the company, with a director’s legal duties.
What is a managing director?
A managing director is the person who runs a business on behalf of its board and owners. The Institute of Directors describes the managing director or chief executive as the most senior full-time executive of the company, unless there is an executive chair, and says the two roles are virtually the same; the chief executive title originally comes from the US.
The IoD puts the purpose of the job in one line: to direct and control the company’s operations and give strategic guidance to the board, so the company meets its objectives. The board sets the overall strategy; the managing director is responsible for the company’s performance against it.
The title travels. In an owner-managed business the MD is the top executive and often a shareholder. In a group, each subsidiary or division may have its own managing director under a group chief executive. And in investment banking and some professional firms, managing director is a seniority grade rather than the person running the business, which is a different job from the one this page describes.
What a managing director does day to day
The IoD’s list of an MD’s main responsibilities is long, and it is a fair picture of the job in a small or mid-sized company. Grouped, it covers:
- The plan. Preparing the corporate plan and the annual business plan, and monitoring progress against them.
- The budget. Preparing the annual budget, getting it accepted by the board and making sure the targets are met.
- The board. Advising the chair and the directors on developments in the market, and making sure the right policies are in place.
- People. Directing the work and resources of the company, and recruiting, keeping and developing the team it needs.
- Customers and stakeholders. Keeping the links with major customers, suppliers, regulators and other key contacts, and negotiating the most important contracts.
- Products and market. Keeping the company competitive through its products, services, marketing and quality.
- Accounts and compliance. Overseeing the annual report and accounts for board approval, and making sure the company complies with health and safety and other legal requirements.
Is a managing director a company director? The Companies Act meaning
"Managing director" is a job title, not an office the law creates. The legal test is about substance: in the Companies Acts, “director” includes any person occupying the position of director, by whatever name called. A managing director appointed to the board is a director in law. One who is not appointed but acts as a director can be treated as one too.
A director owes the company the general duties in sections 171 to 177 of the Companies Act 2006: to act within their powers, promote the success of the company, exercise independent judgement, use reasonable care, skill and diligence, avoid conflicts of interest, refuse benefits from third parties and declare interests in proposed transactions. Companies House guidance adds that these duties apply even if you act as a director without being formally appointed, or if someone else tells you what to do.
Directors carry practical obligations as well. Every director must now verify their identity with Companies House, and directors are responsible for sending the accounts and confirmation statement on time. The HSE’s Leading health and safety at work sets out what it expects of directors and board members in organisations of every size.
Managing director vs CEO vs chairman
Managing director and CEO. In a single company these are usually the same job under two names. The IoD treats them as one role. Where a group uses both titles, the chief executive leads the group and sets the strategy across it, and a managing director runs one business inside it. Our page on what a CEO does covers the group seat.
Managing director and chairman. The chair leads the board; the managing director leads the business. The IoD describes the chair’s job as making the board effective in setting and implementing the company’s direction and strategy, and lists supporting the chief executive or MD among the chair’s tasks. It notes that the two roles are often combined in smaller companies, but that a joint role is not recommended for listed companies. The chair has the same legal duties as the other directors.
An executive chair is the exception: a chair who also runs the business, in which case the IoD treats them, not the MD, as the most senior executive. A non-executive director sits on the board without running anything, to challenge and support the executives.
In banks, insurers and other FCA-regulated firms, the chief executive and executive directors hold senior management functions and need regulatory approval before they start, whatever the business calls them.
The managing director of a subsidiary or division
A subsidiary MD runs a separate company owned by a group. They are usually appointed to the subsidiary’s own board, and their director’s duties are owed to that company, which is a separate legal person from its parent. The day-to-day reporting line usually runs to the group chief executive or a divisional head, so the MD answers to two places: the subsidiary’s board in law, and the group in practice.
A divisional MD runs a part of a business that is not a separate company: a product line, a region or a country. The title may carry no directorship at all. Read the appointment letter: whether the role sits on a board, which one, and what it owns, from a full profit and loss account to one site.
This is why managing director roles vary so widely in scope and pay, and why the job description matters more than the title. Our managing director job description sets out what to write down.
Permanent, interim and fractional managing directors
A permanent MD is employed full-time with no fixed end date: the usual choice for a business that needs someone running it every day for years.
An interim MD holds the seat full-time for a fixed period: after a sudden departure, through a turnaround or a sale, or while the board searches for a permanent appointment. The nearest page we keep is for the interim CEO.
A fractional MD works set days a week, often beside an owner who wants to step back from running the business without selling it. See the fractional CEO page for how that works.
An interim or fractional MD who works through their own company may fall within the off-payroll working rules (IR35). Status turns on how the engagement runs in practice, and a medium or large client makes the determination. Our IR35 guide sets out the tests.
What an MD earns, and how to hire one
Pay depends on the size of the business, its ownership, the sector and whether the role runs a whole company or one division inside a group. Our managing director salary page sets out the published figures, each with its source.
To hire a managing director, start with what the seat owns and who it answers to, then decide whether the business needs a permanent, interim or fractional MD. Test candidates on results they were answerable for. To hire for set days a week or for cover, see our page on how to hire a fractional CEO; for open roles, see managing director jobs.
We recruit fractional, interim, part-time, temporary and permanent executives, and non-executive directors. For a managing director brief we send a shortlist of 3–5, each with pay or day rate, availability and IR35 position set out, after our five-stage vetting.
Questions people ask
What is a managing director?
The most senior executive running a company day to day, responsible to the board for its performance. The IoD treats the managing director and the chief executive as virtually the same role.
Is a managing director the same as a CEO?
In a single company, usually yes: the two titles describe the same job. In a group that uses both, the chief executive leads the group and a managing director runs one business inside it. See what a CEO does.
What is the difference between a managing director and a chairman?
The chair leads the board; the MD leads the business. The IoD notes the roles are often combined in smaller companies but does not recommend combining them in a listed company.
Is a managing director legally a director?
Usually, but the title alone does not decide it. Under the Companies Act, a director is anyone occupying the position of director, by whatever name called. An MD appointed to the board, or acting as a director, owes the statutory duties.
What does the managing director of a subsidiary do?
Runs that company for the group. A subsidiary MD usually sits on the subsidiary’s board and owes their duties to it, while reporting day to day to the group chief executive or a divisional head.
What does managing director mean in a bank?
In investment banking and some professional firms, managing director is a senior grade, not the person who runs the business. The job is different from the general-management MD this page describes.
What does a managing director earn?
It depends on business size, ownership, sector and scope. Our managing director salary page sets out published figures with their sources. On every shortlist we set out each candidate’s pay or day rate.
How do I hire a managing director?
Write down what the seat owns and who it answers to, choose permanent, interim or fractional, and test candidates on results they owned. Our page on how to hire a CEO covers part-week and interim hires; we send a shortlist of 3–5 after five-stage vetting.
