Non-Executive Director Report: Analysis of Roles and Duties

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Added on  2023/06/04

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This report examines the role and responsibilities of non-executive directors (NEDs) within a company. It defines the role of a non-executive director, as someone not part of the executive team, but who contributes to organizational planning and policy-making. The report emphasizes the importance of NEDs in providing independent oversight, challenging executive directors, and ensuring proper organizational function. The report also discusses the qualifications required for NEDs, stating that the role is less about formal qualifications and more about the individual's ability to fit the needs of the organization. The report highlights the legal duties and liabilities of NEDs, similar to those of executive directors. The report also provides references for further reading.
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Running head: NON-EXECUTIVE DIRECTOR 1
NON-EXECUTIVE DIRECTOR
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NON-EXECUTIVE DIRECTOR
What is a non-executive director, and what are the roles of non-executive directors
when appointed to a company board? In your presentation you are to address the
following issues:
1. What is the definition of a non-executive director in Australia?
According to Zattoni and Cuomo (2010) a non-executive director is part of the
company’s board of directors although he is not a member of the executive team and does
not take part in their roles. Non-executive directors take part in the organizational
planning and policy-making exercises and is not involved in the daily management of the
organizational activities. Additionally, the responsibilities of a non-executive director
include acting to ensure the success of the company and monitoring the performance of
the executive directors.
2. What are the qualifications of non-executive directors, or is there no qualification
required?
There is no specific certification or qualification required for a person to assume
the role of a non-executive director. Basically, becoming a successful non-executive
director is more about personal qualities and experience, and is not high based on
educational background or theory. The choice of a non-executive director is based on
evidence on a match between the potential candidate and the needs of the organization.
Therefore, although various potential candidates possess their unique weaknesses and
strengths, and have the potential of a great performance in different contexts, a non-
executive director needs to be a ‘perfect fit’ for the organization (Hahn & Lasfer, 2011).
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NON-EXECUTIVE DIRECTOR
3. Why do companies appoint such directors, and what is their role in the company in
which they are appointed?
Basically, the main responsibilities and functions of non-executive directors are
for the provision of creative contributions to the board through the provision of
constructive challenge and independent oversight to the executive directors. Non-
executive directors have an important responsibility of contributing to ensure that
organizations run properly, thus contributing to the larger economy. The non-executive
directors should bring their own independent judgment on bearing issues of resources,
performance, and strategy, including standards of conduct and appointments.
Furthermore, non-executive directors have the same potential liabilities and legal duties
as their executive. Most importantly, non-executive directors should show commitment to
the success of the organization as their executive counterparts.
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NON-EXECUTIVE DIRECTOR
References
Hahn, P. D., & Lasfer, M. (2011). The compensation of non-executive directors: rationale, form,
and findings. Journal of Management & Governance, 15(4), 589-601.
Zattoni, A., & Cuomo, F. (2010). How independent, competent and incentivized should non
executive directors be? An empirical investigation of good governance codes. British
Journal of Management, 21(1), 63-79.
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