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Difference between Independent and Nonexecutive Director

Kumar (Article) (922 Points)

10 June 2010

Is there any difference between Independent and Non executive Director ?

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12 Replies

Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 10 June 2010

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.

Independent directors are directors who apart from receiving director’s remuneration do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the judgement of the board may affect their independence of judgement.

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 10 June 2010

Non Executive Directors are the directors who are not in the employment of the company they do not involved in the day-to-day running of business but monitor the executive activity and contribute to the development of strategy.

Independent Directors are those non executive directors who apart of receiving directors' remuneration, does not have any material pecuniary relationship or transaction with the company or its promoters or its directors or its senior management or its holding or subsidiary company or associates which may affect independence of the director.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 10 June 2010

Agree with the learned members !!!

Normally MD/WTD and a director drawing salary are considered as executive director. You may consider other directors as non-executive directors.

A non-executive director may be an independent or dependent director. Independent director here means a director who does not have any material monetary relationship with the company except his approved remuneration.

Thanks

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vivek (CS) (751 Points)
Replied 10 June 2010

Directors who are in whole time employment and drawning salary called executive directors others are non executive director.

Independent directors are definetely a non executive director but vice versa is not true always.

Nitin Grover (CS) (1228 Points)
Replied 10 June 2010

Dear Friend

In general way their is not a big difference but in understanding their is difference.

Non Executive Director means not regular only while Independent Director means non dependent on the company.

Generally if person/group of person like Family incorporate 5-6 companies or more then they will be a Non-Executive Directors.

Independent Directors concept used in Big Companies and Independent Directors are for carrying of Company from Directors and other internal controls also beneficial for Shareholders and also from Non-Executive Directors

and one imp thing is that Independent Director will also be a Non-Executive Director because he dont come regular.

Regards

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CA Rajkumar Singh (SERVICE) (21 Points)
Replied 20 August 2012

Simply put:-

A non-executive director is the member of Board who is not in employment with the company. A non-executive director may or may not hold shares in the company.

An independent director is the member of Board who does not own any shares in the company and does not have any monetary relationship with the company except his remuneration.

Tanveer Md Masood (Indispensable) (361 Points)
Replied 20 August 2012

HI KUMAR, AS COMMENTED BY SEVERAL LEARNED PROFESSIONALS ABOVE, A NON-EXECUTIVE DIRECTOR ARE NOT REGULAR DIRECTORS OR EMPLOYEES OF THE COMPANY AND ARE NOT INCHARGE OF THE DAY TO DAY AFFAIRS OF THE BUSINESS. THE RESPONSSISBILITY OF MANGEMENT OF THE COMPANY IS NOT VESTED ON THEM LIKE WHOLETIME DIRECTORS AND MANAGING DIRECTORS . HOWEVER, THEY ARE ENTITLED TO SITTING FEES FOR ATTENDING BM AND GM. THEY ARE BASICALLY PART TIME DIRECTORS OF THE COMPANY. EVEN MR.ANIL AMBANI OF RELIANCE DRAWS REMUNERATION BY OF SITTING FEES AND NOT BY SALARY. ON THE CONTRARY, INDEPENDENT DIRECTORS ARE THOSE DIRECTORS WHO APART FROM RECEIVING DIRECTORS REMUNERATION DOES NOT HAVE MATERIAL PECUNIARY RELATIONSHIP WITH THE COMPANY , ITS PROMOTERS, ITS SENIOR MANAGEMENT OR ITS DIRECTORS. IN OTHERWORDS, THEY ARE SIMPLY ENTITLED TO DRAW REMUNERATION FROM THE COMPANY. REGARDS, TANVEER MD MASOOD CS(PROFESSIONAL STAGE)

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CA. PREM NAILWAL (AUDITOR) (39 Points)
Replied 14 February 2015

non-executive may be interested or concerned but will not involve himself in any routine based business related activities. however independent do not have any relation either indirectly/directly in any action /activity of the company except his salary

(Guest)

Agreed with Members

Ayisha Anis (Student) (696 Points)
Replied 01 September 2020

A member of the board may be an executive director or a non executive director. An executive director is involved in the day to day affairs of the company and is in full time employment of the company. However a non-executive director is not involved in the day to day management and is expected to provide an objective judgement on issues facing the company.

A person maybe in full-time employment of a holding company and still be a non-executive director for it’s subsidiary company unless he is explicitly involved in the management of it’s day to day affairs.

An independent director is essentially, a non executive director who has no material pecuniary transactions with the company, except for his remuneration. There are several criterion that a director has to qualify for being an “Independent director”, depending on the corporate regulations in force in a country. There may be limits on the extent of shareholding, on the interest in the company material to personal wealth, and on any fiduciary relationship with the company that may impede his judgement.

An independent director is a non executive director, but a non executive director need not necessarily be an independent director.