Recruiting directors

Appointing and remunerating directors

The appointment of directors is typically set out in a company's articles of association. These may impose restrictions on, say, the number of directors or the length of their service. If your business does not have this process covered in the articles of association, decide on appropriate procedures for appointing directors.

You also need to comply with the legal requirements when making appointments. For information on who can be a director and who is disqualified from such positions see our guide on company directors' responsibilities.

It is considered best practice to involve all directors in the appointment of new directors - some businesses set up nomination committees to handle this. Large shareholders, particularly venture capitalists, may demand board representation in return for investment. They usually take a non-executive position, and can provide plenty of advice based on their experience with growing companies.

Download a guide on the ideal personal qualities for a finance director from the Chartered Institute of Management Accountants (CIMA) website (PDF).

Remuneration
The issue of remuneration needs to be handled carefully. Clearly, each director's level of experience will be a factor in deciding their pay. Executive directors receive a salary, while non-executive directors may receive a salary if employed, or receive fees if self-employed.

You may decide to include shares, share options, pension provision, company cars or incentive schemes in director remuneration packages. For information on remuneration see our guides on how to set the right pay rates and implement staff incentive schemes. You will need to consider the tax implications of these types of remuneration.

It is considered good practice to have executive directors' pay decided by the non-executive directors to avoid any conflict of interest. Download a guide on executive remuneration from the CIMA website (PDF).

Subjects covered in this guide

• Introduction
• The different types of director
• Structuring the board
• Choosing a director
• The recruitment process
• Appointing and remunerating directors
• Get the most from your directors
• Here's how I recruited directors with different and complementary skills