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Role of other executive directors - Coggle Diagram
Role of other executive directors
The Code makes provision about the balance of executive and NEDs on the board but has nothing else to say about the role of executive directors
In addition to their responsibilities as directors, executive directors are full time employees of the company with executive management resposnbiilitites
As directors, they have the same duties as other members of a unitary board. These duties extend to the whole of the business and not just that part of it covered by their individual executive roles
The only constant on most boards is the presence of a CEO and a finance directors.
Many companies have deliberately reduced the number of executive directors that serve on the board in order to reduce the number of NEDs required and keep the overall size of the board down to manageable proportions
There can be tensions for executive directors between
Their role as members of the board, one step down from the shareholders
Their role as senior operational directors, one step up from management
The executive directors perhaps influenced by the CEO will often want to present a united from tto the rest of the board, perhaps to justify what the management team has done or what it would like to do
Unlikely to provide any effective challenge at board meetings to proposals made by the CEO and other members of the executive team
May have argued against proposals in prior discussions with the CEO but will often be reluctant to air these differences at board meetings, to do so would be seen as undermining the CEO
Independent NEDs do not have these problems which is why they are more free to provide effective challenge during board discussions, particularly where they are encouraged to do so by the chair
NEDs often do not know as much about the business as the executives
If it is always the NEDs who challenge proposals and the executives who defend them, this can create an 'us and them' mentality on the board. The executives may always be inclined
To suppor the views of the CEO on all matters, including strategy
Mistrust the views of NEDs as 'outsiders' who do not know much about the company and its business
To address these potential problems, the FRC guidance recommends that executive directors should
Not see themselves only as members of the CEOs team when engaged in board business
Broadedn their understanding of their board responsibility by taking up a NED position on another board (although they should not take on more than one NED position in a FTSE 100 company or other significant appointment )
Welcome constructive challenge from the NEDs as an essential aspect of good governance and encourage their NED colleagues to test proposals in the lighted of their wider experience outside the company
The FRC guidance also states that it is the responsibility of the CEO to ensure the board knows the views of the senior management on business issues and to explain in a balanced way any divergence of view