Differences between the company's board of directors and general mananger

In a private limited liability company, both the board of directors and the general manager have important but different roles. While the board of directors is a mandatory body in every company, it is not required to have a general manager in Norwegian private limited liability companies. In companies with a general manager, a clear distribution of responsibilities between the board of directors and the general manager is important for an efficient operation and good corporate governance. But what exactly is the difference between the role and responsibilities of the board of directors and the general manager?

Area of responsibility

Chapter 6 of the Norwegian Companies Act regulates the company's management and the relationship between the board and general manager. The board has the overall responsibility for the company's management and operations. This involves ensuring sound organisation, setting long-term goals and strategies, and overseeing the company's finances and risk management. The board is also responsible for hiring and possibly dismissing the general manager.

The general manager on the other hand is responsible for the day-to-day management. This includes everything from operational decisions to the ongoing management of the company's resources and employees. The general manager must follow the board's instructions and guidelines, but has the freedom to decide how the day-to-day operations are carried out within this framework.

While the board focuses on "what" the company shall do, the general manager concentrates on "how" it shall be done.

Decision-making authority

The board makes decisions in matters of greater strategic and financial importance, such as the approval of large investments, the conclusion or termination of important contracts, mergers, acquisitions, and budgeting. The board's decisions may have major impact on the company's long-term position in the market.

The general manager makes decisions related to day-to-day operations, such as hiring (apart from top management), handling customer and supplier agreements, and activities within production, sales and marketing. The general manager must ensure that the company operates in accordance with laws and regulations, and that it achieves its operational targets. Although the general manager has a great deal of freedom in the day-to-day operations, the board of directors may provide instructions in specific matters when it is deemed necessary.

Responsibility to shareholders

The board is accountable to the shareholders and must ensure that the company's operations safeguard the interests of the owners and the company in the best possible way. This means that the board must contribute to increasing shareholder value, ensuring good returns and ensuring sustainable and responsible operations.

The general manager reports to the board and is responsible for ensuring that day-to-day management is in line with the board's strategies and decisions. The general manager is the face of the company and must deal with ongoing business challenges, while keeping the board informed of status and developments.

While the board acts as a link between the shareholders and management, ensuring that management complies with the shareholders' goals and priorities, the general manager acts as a channel between the company's operations and the board's strategic goals.

Follow-up and control

The board shall follow up the company's management and finances by ensuring that accounts and financial reports are correct, and that the company complies with laws, regulations and industry standards. The board is also responsible for risk management and assessing whether the company handles external challenges, such as market changes and competition, in a satisfactory manner.

The general manager is responsible for monitoring the daily operations, ensuring efficiency, maintaining production, and making sure that internal processes support the company's strategic goals. The general manager shall regularly report to the board on progress, results, and any deviations or challenges that may affect the company's effectiveness.

It must be a clear distinction between the board's strategic role and the general manager's operational function in order to ensure that the company is successful. At the same time, good cooperation between the two is necessary to achieve the company's goals. The board should focus on long-term strategies, while the general manager ensures that the goals are achieved through efficient day-to-day operations. Clearly defined roles and well achieved cooperation contribute to growth and stability in the company.

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