What is a Non-Executive Director?

A Non-Executive Director, also referred to as a Non Exec, NED or NXD, is a part time or non executive role as opposed to the normal executive roles within a company such as Managing Director and Sales Director which are full time roles.

Part time or Non-Executive does not reduce the importance or downplay how crucial a Non-Executive Director can and should be to a company and its Board.

Further information about the role of a non-Executive Director follows:

The difference between Executive Directors and Non-Executive Directors can be described in many ways, is likely to be different in different companies and is difficult to generalise but in order to try and simplify the differences we list the key ones as follows:

• All Directors are equal and Company Law does not differentiate between Executive and Non Executive Director functions.
• Non-Executive Directors do not ordinarily get involved in day-to-day management and there are no reporting lines within a company to a Non Exec.
• A Non-Executive Director will, as a minimum, be expected to attend a Company's monthly or bi-monthly Board meeting.
• The average time commitment for a Non-Executive Director in a Small and Medium Sized Enterprise (SME) is 18 days a year.
• Non-Executive Directors have a key part to play in big PLCs and quoted companies where regulation and corporate governance issues are crucial.
• A Non-Executive Director has a key part to play in an owner managed business and provides a resource that they would not ordinarily be able to afford and is a lot cheaper and more committed than a professional advisor or Consultant.
• A Non-Executive Director is distinctly different from a retained professional advisor, an Interim Manager or Consultant. Advisors are paid to advise and Directors are paid to decide.
• Most Non-Executive Directors will have more than one Non-Executive Directorship, probably with a maximum of five.
•  A Non-Executive Director has responsibilities as a "corporate policeman or watchdog" with adherence to good practise, adherence to Boardroom disciplines, corporate governance and corporate responsibilities.
• A Non-Executive Director's main area of responsibility with owner-managed companies is to agree and monitor Company strategy.
• A Non-Executive Director must add value to the Company and the Board otherwise they have no role.
• A Non-Executive Director should be able to gain the trust and respect of other Board members.
• A Non-Executive Director should give support to the MD, act as a mentor and "Wise Owl" while remaining independent.
• A Non-Executive Director on a Company's Board must have sufficient credibility - experience and stature to provide comfort to a company's suppliers, bankers and funders.
• A Non-Executive Director should be able to act as an effective referee on a company's Board.
• Government led reviews over the last few years, like the Higgs Review produced by Sir Derek Higgs in 2003, were the precursor of the Combined Code on Corporate Governance which has as one of its main stipulations (para A.3.2.) that "a smaller company should have at least two independent Non-Executive Directors".