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What Is a Non-Executive Director?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 July 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
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Also known as an external director or outside director, an non-executive director is a professional who aids in planning and policy making as well as serving as an overseer for an executive director, but is typically not involved in the day-to-day operations of the organization. Non-executive directors often engage in tasks that have some impact on the overall operation of the business or non-profit organization, and will often work closely with an executive director to ensure that established policies and procedures are being followed. A non-executive director will also be involved in representing the interests of a board of directors as well as any investors with a stake in the ongoing function of the organization.

There are a number of reasons why an organization may choose to include a non-executive director in the organizational structure. In some cases, public relations is a key factor. Assuming the individual who occupies the position is well known in the community, his or her reputation may enhance the reputation of the organization, something that can be very helpful for keeping both investor and consumer confidence very high. At other times, the motivation for including a non-executive director in the operational structure is to have access to the expertise and experience of that individual, especially in terms of reviewing and implementing policies that affect the future of the organization.

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With this type of arrangement, the executive director is typically is accountable to the non-executive director, who in turn is accountable to a board or a group of shareholders. When it comes to liability, laws regarding how much indemnity a non-executive director carries will vary. In many instances, both the non-executive and executive directors will carry similar levels of indemnity.

While the non-executive director is not generally involved in the day to day functions of the organization, there may be instances in which he or she will move beyond general policy planning and be directly involved for a period of time. For example, the director may work with staff directly to help implement new procedures, or to possibly step in should some set of circumstances make it impossible for the executive director to fulfill his or her duties. Generally, this greater level of involvement will require permission from a governing body such as a board of directors, and will be somewhat limited in terms of duration and scope. During these periods, the non-executive director remains accountable to the board of directors, and will seek to work with executive administrative personnel as well as the assistant executive director to ensure that the operation runs smoothly.

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