Executive vs. Non-Executive Directors: The Power, The Risks, and The Legal Consequences
CxO 101 Management Lessons Self Help 101 Senior EmpowermentIn the corporate world, executive and non-executive directors play distinct yet complementary roles in ensuring effective governance. While executive directors (EDs) are deeply involved in day-to-day operations, non-executive directors (NEDs) serve as independent watchdogs, providing oversight and strategic guidance. Their legal responsibilities, financial compensation, and liability risks differ significantly—EDs bear greater legal accountability and can have personal assets attached in fraud cases, whereas NEDs focus on compliance, ethics, and risk management with lower direct liability. Regulations like the Companies Act, Sarbanes-Oxley, and SEBI norms shape their duties, emphasizing transparency and corporate integrity. Weak governance can lead to corporate scandals and legal consequences, making board independence, due diligence, and ethical leadership crucial. By understanding these roles, aspiring directors and business leaders can navigate boardroom complexities while minimizing legal risks.
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