Board and non-executive roles
What is the difference between an executive and a non-executive director?
An executive director is a director who also holds a management job in the company, usually as an employee running a function such as finance or technology. A non-executive director holds no management role and no employment contract. Both are registered directors and both owe the company the same general duties under the Companies Act 2006.
Where they differ
The differences are about employment, authority and time, not legal standing.
- Employment: an executive director is normally an employee with a service contract; a non-executive is appointed under a letter of appointment.
- Management: an executive runs a function and has staff; a non-executive manages nobody inside the company.
- Time: an executive works full time; a non-executive commits an agreed number of days a year, concentrated around board meetings.
- Pay: an executive is paid a salary that can include performance-related elements; non-executive fees, under the UK Corporate Governance Code, should not.
- Perspective: an executive is accountable for the plan; a non-executive is there to test whether the plan holds.
Where they do not differ
Legal duty. Section 170(1) of the Companies Act 2006 applies the general duties in sections 171 to 177 to every director of a UK company. There is no reduced standard for a director who only attends six meetings a year. The duty to promote the success of the company under section 173, to exercise independent judgement, and to exercise reasonable care, skill and diligence under section 174, all apply identically.
In a dispute or an insolvency, the question asked of a non-executive is the same question asked of a chief executive: what did you know, what did you ask, and what is minuted.
Sources and review
- Companies Act 2006, Part 10, Chapter 2, sections 170 to 177 (general duties of directors).
- Financial Reporting Council, UK Corporate Governance Code 2024, published 22 January 2024. Provisions 10 and 34.
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