Board and non-executive roles
What is an executive director?
An executive director is a member of a company's board who also holds a management job inside that company, normally as a full-time employee running a function such as finance, operations or technology. They are a registered director filed at Companies House, and they owe the company the general duties set out in the Companies Act 2006.
What an executive director does
An executive director wears two hats. In the business they run a function, carry a budget and manage staff. At the board they take part in setting strategy, approving plans and answering for what their function has delivered.
Both hats sit on one head, so the same person proposes the plan and votes on it. That is why boards balance executive directors with non-executives whose judgement is not tied to the plan they wrote.
- Employed under a service contract, with a salary that can include performance-related pay.
- Runs a function day to day and is accountable for its delivery.
- Sits on the board and votes on board decisions like any other director.
- Registered at Companies House and subject to directors' duties in full.
Executive director, managing director, chief executive
Section 250 of the Companies Act 2006 defines a director as including any person occupying the position of director, by whatever name called. The Act does not create separate legal categories for these titles, so they describe roles rather than statuses in law.
In ordinary use, managing director and chief executive describe the most senior executive role, while executive director describes any director who is also an employee with a management job. A chief executive who sits on the board is an executive director. A chief executive who does not sit on the board is a senior manager rather than a director, whatever the business card says.
The duties that come with the seat
Section 170(1) of the Companies Act 2006 applies the general duties in sections 171 to 177 to every director. An executive director owes those duties to the company itself, not to the chief executive who line-manages them and not to the shareholder who nominated them. Where the two pull apart, the duty to the company wins.
Sources and review
- Companies Act 2006, Part 10, Chapter 2, sections 170 to 177 (general duties of directors).
- Companies Act 2006, section 250, meaning of “director”.
- Financial Reporting Council, UK Corporate Governance Code 2024, published 22 January 2024. Provisions 9 to 11, board composition and independence.
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