Non-executive director
Encyclopedia
A non-executive director (NED, also NXD) or outside director is a member of the board of directors
of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way. They are differentiated from inside director
s, who are members of the board who also serve or previously served as executive managers of the company (most often as corporate officers).
Non-executive directors have responsibilities in the following areas, according to the Higgs Report, commissioned by the British Government and published in 2003:
NEDs should also provide independent views on:
Non-executive directors are the custodians of the governance
process. They are not involved in the day-to-day running of business but monitor the executive activity and contribute to the development of strategy
.
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way. They are differentiated from inside director
Executive director
Executive director is a term sometimes applied to the chief executive officer or managing director of an organization, company, or corporation. It is widely used in North American non-profit organizations, though in recent decades many U.S. nonprofits have adopted the title "President/CEO"...
s, who are members of the board who also serve or previously served as executive managers of the company (most often as corporate officers).
Non-executive directors have responsibilities in the following areas, according to the Higgs Report, commissioned by the British Government and published in 2003:
- Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy.
- Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitoring, and where necessary removing, senior management and in succession planning.
- Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
- People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.
NEDs should also provide independent views on:
- Resources
- Appointments
- Standards of conduct
Non-executive directors are the custodians of the governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
process. They are not involved in the day-to-day running of business but monitor the executive activity and contribute to the development of strategy
Strategy
Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...
.
See also
- Agency costAgency costAn agency cost is an economic concept that relates to the cost incurred by an entity associated with problems such as divergent management-shareholder objectives and information asymmetry...
- Chair (official)Chair (official)The chairman is the highest officer of an organized group such as a board, committee, or deliberative assembly. The person holding the office is typically elected or appointed by the members of the group. The chairman presides over meetings of the assembled group and conducts its business in an...
- Corporate titleCorporate titlePublicly and privately held for-profit corporations confer corporate titles or business titles on company officials as a means of identifying their function in the organization...
- Executive directorExecutive directorExecutive director is a term sometimes applied to the chief executive officer or managing director of an organization, company, or corporation. It is widely used in North American non-profit organizations, though in recent decades many U.S. nonprofits have adopted the title "President/CEO"...
- Board of directorsBoard of directorsA board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
- Managing director
External links
- Financial Times - Non Executive directors' club
- CIPD non-executive directors' resource
- ITNEA, an Association for non executive directors and chairmen
- ITNEAITNEAITNEA or Information and TMT Non-Executives' Association was founded in 1999 by David Tebbs and is the United Kingdom association for non-executive Directors and non-executive Chairmen of listed IT, telecommunications and related media companies...