Board and non-executive roles
Executive director vs non-executive director: what is the difference?
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.
Executive vs non-executive director, side by side
The differences are about employment, authority and time, not legal standing.
| Criterion | Executive director | Non-executive director |
|---|---|---|
| Employment | Employee on a service contract | Appointed by letter of appointment |
| Management | Runs a function and has staff | Manages nobody in the company |
| Time | Normally full time | An agreed number of days a year |
| Pay | Salary, which may be performance-related | A fee that should exclude share options |
| Board vote | Yes | Yes |
| Statutory duties | Sections 170 to 177 in full | Sections 170 to 177 in full |
- Perspective is the real difference: an executive is accountable for the plan, a non-executive is there to test whether the plan holds.
- Independence is judged, not assumed. Provision 10 of the UK Corporate Governance Code lists what impairs it, including recent employment and additional performance-related pay.
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 172, to exercise independent judgement under section 173, 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.
Which one a growing company needs
If the work is running technology day to day, that is an executive role, and at an early stage it is often filled part time rather than by a permanent hire. If the work is testing what the executive team is telling the board, that is a non-executive seat. Mixing the two removes the scrutiny you were paying for, so this practice keeps board appointments separate from delivery engagements.
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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