Lexicon
The different types of company directors
Different types of company directors. A complete corporate governance guide to the various titles you’ll encounter in the boardroom and the responsibilities associated with each role.
💡Key takeaways: |
|---|
|
The different types of company directors
Directors who have full, paid, executive or management roles in the company. The most common kind of executive director is the company’s CEO, who runs day-to-day operations and is in regularly in touch with managers and employees, but who also sits on the board.
Directors who do not have full, paid executive or management roles in the company. Their only job – as far as the company is concerned – is to be on the board. They have minimal contact with day-to-day matters, which usually helps in their independent judgement.
Non-executive directors can sometimes be called independent directors, outside directors or external directors.
Directors who (like NEDs) have no full-time role in the company, but who also have no other material connections to it.
For example, an average NED could be a former employee, a shareholder, someone with business ties to the company, or someone with personal relationships with executives (friends/family, etc.).
INEDs have no such relationships. They are specifically recruited because their approach and mindset are completely independent and thus a valuable perspective in boardroom decisions.
The term INED is used more in some regions than others. For example, it’s very popular in the UK and Ireland. Other terms include independent director.which can also signify a normal NED – always check the context if you’re unsure) or non-affiliated director.
The leader of the board of directors. They run board meetings, oversee board committees, and have a key relationship with the CEO.
Many chairs – especially first-timers – make the mistake of acting like a CEO, giving orders and taking up a lot of speaking time at meetings. In reality, a chair behaves more often like a “first among equals”. Their primary role is to facilitate a team of experts as they make decisions for the benefit of the company.
A director who steps in to fill the functions of a normal director in the event of temporary absence (illness, travel, etc).
Usually, the normal director in question will nominate their alternate, but the approval of such a director will depend on the rest of the board and must meet any rules set out in the company’s articles of association.
Proxy
A person who is not a director, but who is authorised to vote on behalf of a certain director at a specified meeting.
Proxies and alternate directors sound the same, but proxies are only in place to cast votes. Alternate directors have expanded roles, taking part in debates, etc as well. Both require the approval of the rest of the board and the company’s articles of association to carry out their functions.
Shadow director
A person who is not a director, but whose opinion the board usually takes and follows in its decision-making.
Shadow directors are common, but they do tend to attract debate in terms of the level of responsibility they should carry. For example, shadow directors are not official board members, so what happens when some of the advice that they routinely give the board ultimately leads the company into trouble? How much of the blame should they legally face?
De factor directors
Although not officially appointed to the board, de facto directors assume the role of directors. For example, they sign contracts, make decisions, and appear to third parties as a director on behalf of the company.
A de facto director has the same responsibilities toward the company as a regular director.
Resources
About this author
