Independent Directors in an Organisation

Topics: Corporate governance, Board of directors, Non-executive director Pages: 5 (1352 words) Published: August 20, 2013

Topic Page No.

1) Introduction 1

2) Types of Director 1

3) What is an Independent Director 2

4) Role of an Independent Director 3

5) References 5

All companies must have officers. A private limited company must have at least two director and a company secretary and a public limited company must have at least three directors and a company secretary. The director, or directors, must manage the company's affairs in accordance with its articles of association and the law. Certain responsibilities apply to all directors, whether executive or non-executive, and to all types of company whether trading or not. The company secretary is the chief administrator of the company. Read more about company secretaries. There are two broad types of company director:

* Executive director
* Non-executive director
Executive Directors (Chief Executive Officers)
The chief executive officer has the overall, primary management and leadership role in the organisation. Therefore, the CEO must have extensive knowledge and skills in a wide variety of areas. There is no standard list of the major responsibilities carried out by a chief executive officer, however the list below outlines the most common. * Board Administration and Support

Supports board members by advising and informing, going between board members and staff, and supporting the board's evaluation of chief executive. * Program, Product and Service Delivery
Oversees design, marketing, promotion, delivery and quality of programs, products and services. * Financial, Tax, Risk and Facilities Management
Recommends an annual budget for Board approval and then manages resources within the budget. * Human Resource Management
Oversees the management of the human resources team ensuring that they comply with current laws and regulations. * Community and Public Relations
Ensures that the venture is seen in a positive light from outsiders.

* Fundraising (nonprofits-specific)
Oversees fundraising planning and implementation.

What is a Non-Executive Director?
A non-executive’s role is less hands-on. A non-executive director may have less experience and less knowledge than an executive. However, the benefit here is that a non-executive can bring objectivity and an external awareness to the board. Non-executive directors are not usually involved with day-to-day management, however, the smaller the company, the more likely it is that there will be some hands-on work. The non-executive’s role is an over-viewer and whistle blower, ensuring adherence to good practice, respect for the interests of other stakeholders and adherence to the process of boardroom discipline. Non-executives are often thought of as “advisers” although this is not the case. The role is larger than this – the non-exec is a director and shares the legal duties and responsibilities of the executive directors. As far as corporate governance is concerned, non-executives are usually associated with Independence and may be self employed.

Who is an Independent Director?
Independent Director means non-executive Director who, apart from receiving directors remuneration, does not have any material/ pecuniary relationship or transaction with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates, which in judgment of the Board may affect independence of judgment of the Director. The Companies Act, 1956 do not specifically gives the definition of the...

References: The Companies Act, 1956 do not specifically gives the definition of the Independent Director. However clause 49 of the Listing Agreement gives the definition.
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