Business, Legal & Accounting Glossary
A director is usually a person who carries out executive responsibilities and is a member of the board of directors, elected by members of the company or organisation in question. By law, directors have certain responsibilities and obligations towards the company and its members. In the UK, company law does not distinguish between executive and non-executive directors. The ultimate legal definition of a director depends on the actual responsibilities rather than the title itself. Hence, a person can be identified as a director without being a member of the board of directors or even employed as a director.
In the UK, there are two main types of directors, executive directors and non-executive directors. There is nothing preventing companies from giving official titles such as creative directors or finance directors. Legally, it does not make a difference and in fact, only in a business sense, there is a difference between non-executive directors and executive directors.
Executive directors are people who sit on the board of directors and take charge of the company’s business affairs including:
Typically, executive directors are engaged on a full-time basis. This is achieved either by formal employment or self-employment.
A non-executive director is a person who is a member of the board of directors but who is not involved in a day to day running of the business. A non-executive director is usually not an employee of the company nor is related to it in any other way than being a member of the board of directors. He or she is not an employee of the company or affiliated with it in any other way. Non-executive directors can however also own shares in companies.
In the UK, the Higgs Report published in 2003 reviewed the role and effectiveness of non-executive directors. The report states that non-executive directors are usually involved in the following areas:
It is vitally important that non-executive director always remains impartial in relation to his decision-making.
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This glossary post was last updated: 25th February, 2020 | 0 Views.