Executive Director (Non-Executive Director)

Definition

The term executive director refers to a board of director member that is also an executive of the company. A company's chief executive officer that is also a member of its board of directors would be considered an executive director.

Explanation

A board of directors (BOD) is a select group of individuals who jointly oversee the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Publicly traded companies are required to have a board of directors.

Executives of a company that are also a member of its board of directors are executive directors, in addition to being inside directors. For example, a chief executive officer of a company that is also a member of its BOD would be considered an executive director. As is the case with all inside directors, executive directors have first-hand knowledge of the company's operations, their participation and input is essential to the successful decision-making process of the board.

The BOD's powers, duties and responsibilities are determined by government regulations and the organization's own constitution and bylaws. The primary responsibility of the BOD is to make non-operating decisions on behalf of the organization or its shareholders. Since there are oftentimes perceived conflicts of interest, the number of executive directors is typically limited.

Related Terms

outside directorinside directorboard of directors