The difference between a director and a non-executive director

The main difference is in levels of responsibility: Executive directors serve on the board of a company and take part in managing day-to-day operations. Non-executive directors just sit on the board and have little involvement with day-to-day issues.

Practically

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 insights, and to constructively 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.

• 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.

Aspiring directors and non–executive directors can receive training to help them understand their role and responsibilities. 

To develop the practical knowledge, insight and global mindset of a great director and non-executive director, you can take the Diploma in Corporate Governance.

Download the course brochure here.