The difference between a director and a non-executive director

difference-between-director-and-non-executive-director

The first main difference between a director and a non-executive director (NED) is that a NED is not on the board of directors to run the day-to-day business.  

Running the day-to-day business of the company is the job of the executive directors and senior management.

NEDs are on boards to provide oversight, sectoral expertise, knowledge and new skills, and challenge management when the need arises. 

A NED must consider company strategy, performance, risk, people and they should actively monitor management executives’ activities. 

It is important to note that non-executive directors have the same legal responsibilities as executive directors.

Being a non-executive director involves a legal obligation of the highest degree. If a non-executive director doesn’t challenge bad corporate governance or ethical breaches, they can fall foul of the law.

The critical differences between directors and non-executive directors:

  • Executive directors are responsible for the day-to-day management of the company working alongside the other board members. In smaller companies, the directors and shareholders may be the same people, but the roles are very distinct. Most executive directors are employees of the company.
  • Non-executive directors are not involved in the day-to-day running of the business. They are not employees of the company. Their role is to challenge and develop strategy, scrutinise the board’s performance, manage financial controls and risk, determine remuneration, and appoint or remove executive directors if and when there is a need to do so.