In Business, What is a "Non Executive"?

This may be just a UK thing, but has anyone heard the term “Non Executive Chairman” or “Non Executive Director”? What the heck does the “Non” mean? Is that a non-title? - Jinx

I think it has to do with it being a ‘overseer’ position;

They are not associated with the company in decision making, but oversee what does go on within the company.

Someone else can clarify though, I do know that in Australia a company needs 2 non-executive directors to start up.

Non executive directors typically contribute:

  • Financial investment
  • The prestige of their name and reputation
  • Expertise in key decision-making (mostly at board meetings)

Executive directors are usually involved in the day-to-day running of the business at senior management level.

a) I don’t get it. If they make no decisions, what do they do? Act as a moral conscience for such a company? Perform internal audits? Sounds like a Board that acts as a bunch of figureheads for some purpose unclear to me!

b) If one wishes to write to such a company about something that requires a decision, what would be title of that person? Do they have a CoB? CEO? and/or President and VPs?

Who makes the decisions?

  • Jinx

In a U.S. corporation, there’s a board of directors, who are elected by the shareholders. The board of directors, in turn, hires executives to actually run the company - people with titles like President, CEO, VP, CFO, etc. The directors aren’t involved in the day-to-day running of the company - they provide overall policy guidance and oversight (on behalf of the shareholders).

There’s no law against the board of directors placing themselves into these executive positions. So, I could be a director of the XYZ Corporation, and also be its CEO. Apparently, that’s not true in some other countries. Having non-executive directors is a good idea, however, if for no other reason than that it avoids some messy conflict-of-interest situations (the board places one of its own members into the CFO position, sets the salary for that position, and is supposed to be making sure the CFO is doing his job honestly - a circular mess!).

In a way, yes. Officially they are there to represent shareholders’ interests, though there’s no law saying they actually have to do this.

They make the big decisions, like, should the corporation branch out into a new line of business? Should the corporation merge with another corporation? Should the corporation take over some smaller (or bigger!) company?

Every corporation is different, and every state has different laws, so you need to go that company’s website, and do some exploring. There will always be a board of directors, and a chairman of that board. Beyond that, anything goes. In Virginia, for example, a corporation must have a President and a Secretary. Beyond that, the company can create whatever executive positions it wants to, and assign whatever responsibilities to those executives it cares to. It can have a Chief Cook and Bottle Washer, if that suits its business needs.

Day-to-day decisions about business operations, one of the executives - there’s no pat answer to the question.

Well, if they fail to do so, there’s a little thing called “breach of fiduciary duty” that can bite them in the butt. It’s a civil matter, not criminal, of course - you need to have angry shareholders with torches and pitchforks to pursue an action like that.