Page 169 - F1 - AB Integrated Workbook STUDENT 2018-19

Governance and social responsibility in business

2.2 Types of directors

Those who are involved in the day-to-day running of the company are known as
executive directors.

Non-executive directors (NEDs) are not employees of the company
and have no managerial responsibilities, meaning that they do not
participate in the day-to-day running of the organisation.

However, NEDs do attend board meetings and therefore have a say in the strategic
decision making of the company.

2.3 Roles of NEDs

NEDS have several key roles in the organisation. According to the Higgs report
(2003), these include:

 Strategy – NEDs should constructively challenge and contribute to the
development of strategy

 Performance – NEDs should scrutinise the performance of management in
meeting agreed goals and objectives and monitoring senior management

 Risk – NEDs should satisfy themselves that financial information is accurate
and that financial controls and systems of risk management are robust

 People – NEDs are responsible for determining appropriate levels of
remuneration for executives and have a prime role in appointing and, where
necessary, removing senior management and in succession planning

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