Bpp learning Media is an acca approved Content Provider

Division of responsibilities 
at the head of an organisation is most simply achieved by separating the 
roles of Chair and chief executive.
Independent non-executive directors 
have a key role in governance. Their number and status should 
mean that their views carry significant weight. 
BPP Tutor Toolkit Copy

---

CHAPTER 7
//
CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 
 
187 
3.10 Non-executive directors 
Non-executive directors
have no executive (managerial) responsibilities. 
Non-executive directors are not employees of the company but they do take part in decision-making at 
board meetings. They do not take part in the day-to-day running of the company. 
Non-executive directors should provide a 
balancing influence
, and play a key role in 
reducing conflicts 
of interest
between management (including executive directors) and shareholders. They should provide 
reassurance to shareholders, particularly institutional shareholders, that management is acting in the 
interests of the organisation. 
3.10.1 Role of non-executive directors 
The role of non-executive directors includes: 
(a) 
Strategy
: non-executive directors should contribute to, and challenge the direction of, strategy. 
(b) 
Performance
: non-executive directors should scrutinise the performance of management in 
meeting goals and objectives, and monitor the reporting of performance. 
(c) 
Risk
: non-executive directors should satisfy themselves that financial information is accurate and 
that financial controls and systems of risk management are robust. 
(d) 
Directors and managers
: non-executive directors are responsible for determining appropriate 
levels of remuneration for executives, and are key figures in the appointment and removal of 
senior managers and in succession planning. 
3.10.2 Benefits of effective non-executive directors
Non-executive directors can bring a number of benefits to a board of directors. 
(a) 
They may have external experience and knowledge which executive directors do not possess.
(b) 
Non-executive directors can provide a wider perspective than executive directors who may be 
more involved in detailed operations. 
(c) 
Good non-executive directors are often a comfort factor for third parties such as investors or 
suppliers.
(d) 
The most important advantage perhaps lies in the dual nature of the non-executive director's role. 
Non-executive directors are full board members who are expected to have the level of knowledge 
that full board membership implies. At the same time they are meant to provide the so-called 
strong, independent element on the board. This should imply that they have the knowledge and 
detachment to be able to assess fairly the remuneration of executive directors when serving on 
the remuneration committee, and to be able to discuss knowledgeably with auditors the affairs of 
the company on the audit committee. 
3.10.3 Problems with non-executive directors 
Nevertheless, there are a number of difficulties connected with the role of non-executive director. 
(a) 
In many organisations, non-executive directors may