Executive Vs Non-Executive Director

This query is : Resolved

Rajeswar (Querist)
Follow

15 December 2009 How does an executive director differ from a non-executive director based on the duties of the director?

Kindly throw light on this

Regards

RAJA RAJESWARI S

CS Pawan Kumar Baid

CS Pawan Kumar Baid (Expert)
Follow

15 December 2009 Executive Director are special director and are in full time employment of the company and are assigned particular work/department. Even a whole-time Director (WTD) as per explanation to Sec 269 can be included in executive director.

Non-executive director is not in full time employment, he may be a professional director or independent director.

Maximum remuneration to non-exe director is 1% of net profit (if company has MD or WTD) or 3% (in other cases)

As regards duties, non-exe director attracts general duties of a director, but executive director attracts general as well as special duties u/s 5. There are 7 person (in priority) who are called officer in default u/s 5. MD/WTD is on number 1 and 2 and other executive directors comes to number 6. All other director (including executive director) comes to number 7.

Hence, as a conclusion, executive director has more duties (and hence liabilities) then non-executive.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
Follow

17 December 2009 There are two broad types of company director:

â€¢Executive director, and;
â€¢Non-executive director;

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

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.

Rajeswar

Rajeswar (Querist)
Follow

19 December 2009 Thanks a lot

regards

RAJA RAJESWARI S

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now