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Executive v. Non Executive Director (Corporate Law)

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( Author )
09 November 2010

Can some one please provide me a file showing gud differences between Executive and Non Executive Director???????


CA. SANAT PYNE

( Expert )
09 November 2010

There are two broad types of company director:

* Executive director, and;
* Non-executive director.



There is a distinct difference between them.

Executive Directors (Chief Executive Officers)
The chief executive officer has the overall, primary management and leadership role in the organisation. Therefore, the CEO must have extensive knowledge and skills in a wide variety of areas.

There is no standard list of the major responsibilities carried out by a chief executive officer, however the list below outlines the most common.

Board Administration and Support
Supports board members by advising and informing, going between board members and staff, and supporting the board's evaluation of chief executive.

Program, Product and Service Delivery
Oversees design, marketing, promotion, delivery and quality of programs, products and services.

Financial, Tax, Risk and Facilities Management
Recommends an annual budget for Board approval and then manages resources within the budget.

Human Resource Management
Oversees the management of the human resources team ensuring that they comply with current laws and regulations.

Community and Public Relations
Ensures that the venture is seen in a positive light from outsiders.

Fundraising (nonprofits-specific)
Oversees fundraising planning and implementation.

What is a Non-Executive Director?
A non-executive’s role is less hands-on. A non-executive director may have less experience and less knowledge than an executive. However, the benefit here is that a non-executive can bring objectivity and an external awareness to the board.

Non-executive directors are not usually involved with day-to-day management, however, the smaller the company, the more likely it is that there will be some hands-on work.

The non-executive’s role is an over-viewer and whistle blower, ensuring adherence to good practice, respect for the interests of other stakeholders and adherence to the process of boardroom discipline. Non-executives are often thought of as “advisers” although this is not the case. The role is larger than this – the non-exec is a director and shares the legal duties and responsibilities of the executive directors.

As far as corporate governance is concerned, non-executives are usually associated with Independence and may be self employed.

What is meant by an Independent Non-Executive Director?
The following characteristics are indicative of a state of independence

* The individual is not an employee of the company but perhaps self employed;
* The individual is not a professional advisor;
* Individual is not a supplier or customer of the company;
* The individual does not have a family connection with someone in the business;
* The individual’s directorship is for a fixed term and accordingly he is less likely to be motivated by self-preservation when taking decisions;
* The individual does not depend so heavily on his remuneration from the company as to make resignation difficult.


Ajay Mishra

( Expert )
09 November 2010

Hi

There are two types of director, executive and non-executive. There is no legal distinction made between executive and non-executive directors - the difference is that non-executive directors do not get involved in the day-to-day running of the business.

Executive directors perform operational and strategic business functions such as:

* managing people
* looking after assets
* hiring and firing
* entering into contracts

Executive directors are usually employed by the company and paid a salary, so are protected by employment law and are taxed through the PAYE (Pay As You Earn) system.

Non-executive directors use their experience and expertise to provide independent advice and objectivity, and they usually have a role in monitoring executive management. A non-executive director might be appointed to carry out a specialist role on a part-time basis or for their expertise in specific activities, such as strategy and contract negotiation.

They may be regarded as employed by the business or self-employed under a contract for services, depending on the terms and conditions of engagement. They usually work part time, attending board meetings and spending time on specific projects.

Non-executive directors bring an objective view of the business, can improve the board's effectiveness at relatively low cost and provide valuable business connections.



Ankur Garg

( Expert )
09 November 2010

Normally MD/WTD and a director drawing salary are considered as executive director.

Rest of the directors are considered as Non-executive directors.

Promoters of the company are not executive director automatically, unless they are drawing remuneration.

Regards


Sajay Yesodharan

( Expert )
08 December 2010


thank you


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