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URGENT

samrat (na) (62 Points)

24 April 2010

WHAT IS THE DIFFERENCE BETWEEN NON-EXECUTIVE DIRECTOR AND INDEPENDENT DIRECTOR

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vishnupriya (CA Final) (1418 Points)
Replied 24 April 2010

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 directors, who are members of the board also serving as executive managers of the company (most often as corporate officers).

Non-executive directors have responsibilities in the following areas, according to the 2003 report by Derek Higgs commissioned by the British Government:[1][2]

* 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.

NED's should also provide independent views on:

* Resources
* Appointments
* Standards of conduct

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.

Powers

Equal Member of Board
Power to demand information
Power to exercise her vote
Power to govern