Meranth Governance & Compliance News

June 2014

THE ROLE OF THE EXECUTIVE & NON-

EXECUTIVE DIRECTOR (Companies Code Act
179; S203 -207)
A director (both executive and non-executive) stands in
a special relationship to the company of which they are
a director. This is known as a 'fiduciary position' and
the director is known as a 'fiduciary'. A fiduciary is
required to act in a manner which is legally befitting of
their role as a director and which places the interests
of the company ahead of their own. Therefore, a
director should observe at all times the utmost good
faith to the company, in any transaction with it or on
its behalf.
Types of Directors
There are two types of company directors, that is, the
Executive Director and the Non-executive Director. A
non-executive's role is less hands-on than an executive
director, who is an actual employee of the company.
Also, a non-executive director may have less experience
and less knowledge of the organisation than an
executive.
is their independence of the management of the
company and any of its interested parties.
Distinction
In legal terms, there is no distinction between an
executive and a non-executive director. However, there
is a view that the non-executive director’s role can be
seen to balance that of the executive director. Executive
directors have an innermost knowledge of the
company, whereas the non-executive director is
generally expected to have a wider perspective of the
business at large.
Challenging the Status Quo
The board is collectively responsible for promoting the
success of the company by directing the company's
affairs. The non-executive directors are expected to
constructively challenge and help develop strategy, to
participate actively in the decision-making process of
the board and to scrutinise the performance of
management in meeting agreed goals and objectives.
Research has shown that the highest performing
companies are those governed by boards whose
members are willing to challenge the status quo and
who see healthy disagreement as a key component of a
culture of continuous improvement.

However, the benefit here is that a non-executive can

Meranth Nugget: Ghanaian companies should strive for
bring objectivity and an external awareness to the
their boards to promote good corporate governance in
board. Good corporate governance calls for the
order to make the business stable and secure, growth-
presence of non-executive directors on a board. Non-
oriented, maximally profitable to its shareholders, and
executive directors are chosen because they have a
highly reputed and reliable among all customers and
breadth of experience and specific skills and because
clients concerned. The non-exe
they often bring specialist knowledge to the
deliberations of the board. Of the utmost importance
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