Non-executive director

A non-executive director (abbreviated to non-exec, NED or NXD) or external director is a member of the board of directors of a company or organisation who does not form part of the executive management team. They are not employees of the company or affiliated with it in any other way and are differentiated from inside directors, who are members of the board who also serve or previously served as executive managers of the company (most often as corporate officers). However they do have the same legal duties, responsibilities and potential liabilities as their executive counterparts.

Non-executive directors are directors who act in advisory capacity only. Typically, they attend monthly board meetings to offer the benefit of their advice and serve on committees concerned with sensitive issues such as the pay of the executive directors and other senior managers; they are usually paid a fee for their services but are not regarded as employees.

All directors should be capable of seeing company and business issues in a broad perspective. Nonetheless, non-executive directors are usually chosen because of their independence and initiatives, and are of an appropriate caliber and have particular personal qualities.

Fundamentally the non-executive director role is to provide a creative contribution and improvement to the board by providing dispassionate and objective criticism. Their role may change depending on the organisation, though they are usually not involved in the day-to-day management of the company but monitor the executive activity and contribute to the development strategy.

Non-executive directors can also be referred to as external directors; they are usually people of stature and experience who can act as both a source of wise independent advice and a check on any wilder elements on a board.

According to the institute of Directors, Non-executive directors are expected to focus on board matters and not stray into ‘executive direction,’ thus providing an independent view of the company that is removed from day-to-day running.

Non-executive directors, then, are appointed to bring to the board:

Together with the five important the achievement of balance of the board of directors as a whole as well as commitment, perception and a broad perspective of the area or industry. More key responsibilities may include:

Non-executive directors have responsibilities in the following areas, according to the Review of the role and effectiveness of non-executive directors published by the British government in 2003:

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