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Types of Directors

Dr. Nandita Mishra

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Different types of directors

• Executive Directors

• Non-executive Directors

• Nominee Directors• Representative Directors

•  Alternative Directors

• Shado Directors•  Associate Directors

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The Executive Director 

• !erforms a dual role as mem"er of the

"oard of directors and as an executive in

the or#ani$ation.

•  Accordin# to company la he is

responsi"le to the shareholder li%e any

other type of director.

•  As an employee of the or#ani$ation he is

"ond "y an employment contract.

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Non-executive Director 

• Doesn&t hold any executive position.

• They are also %non as outside director 

•  Apart from receivin# director&s remuneration

they do not have any pecuniary relationship or

transactions ith the company' its mana#ement

or its su"sidiaries.

•  All pecuniary relationships or transactions of thenon-executive directors should "e disclosed in

the annual report.

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Nominee Directors

• They are appointed to the "oard ofdirectors "y the ma(or shareholders orfinancial institutions li%e "an%s' mutual

funds etc.• These directors or% toards

safe#uardin# the interests of their

principles.• They should act in the overall interest of

the company.

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Representative Directors

•  Almost similar to Nominee directors.

• They safe#uard the interests of

sta%eholder #roups li%e employees 'customers etc.

• They also act in the overall interest of the

company.

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 Alternate Directors

•  Are appointed as per the Articles of

 Association to act as su"stitutes in

a"sence of an ori#inal director.

• They en(oy all the poers of the ori#inal

director.

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Shado Directors

• Mainly seen in family oned companies.

• They can influence the decision of the

"oard ithout "ein# present on the "oard.• They can "e held responsi"le for the acts

of the company alon# ith the directors of

the "oard.

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• Some companies #ive titles li%e associate

directors to mana#ers as a to%en of

appreciation or status sym"ol ithin the

hierarchy of the or#ani$ation.

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Types of )oard Structure

•  All Executive )oard

• Ma(ority Executive )oard

• Ma(ority Executive )oard• Ma(ority *utside )oard

• To-tier Supervisory )oard

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 All Executive )oard

• No outside director 

• Every mem"er on the "oard are also

mem"er of the mana#ement.

• +ery common in family oned "usiness

• There is no separation "eteen oner

and mana#ement

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• This type of "oard suffers hen there is

shorta#e of internal talents.

• To ensure "etter corporate #overnance '

non-executive or outside directors are

necessary

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Ma(ority Executive )oard

• Executive directors have a ma(ority on the

"oard hile outside or non-executive

directors are in a minority.

• ,t is conventional to have one-third of the

seats on the "oard filled "y non-executive

directors' they put considera"le pressure

on "oard decisions "y ay of resi#nation ifnecessary.

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• This type of "oard has come under

criticism "ecause the executive directors

dominate the "oard.

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The Ma(ority outside )oard

• This "oard has a ma(ority of outside' non-executive directors.

• This type of "oard structure is common incompanies that are uoted on the Ne or%stoc% exchan#e.

• Most of these outside directors representsta%eholder #roups li%e ma(or stoc%holders'customers' supplier or creditors and other

financial institutions• The effectiveness depends upon ho there

vested interest.

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To- Tier Supervisory )oard

• The Non-executive supervisory "oard .

• The executive mana#ement "oard.

• The supervisory "oard can hire and firethe /E*.

• This structure as first proposed "y theEuropean /ommunity and later "y the

0ermans.• 0ermans have eual representation from

the la"our and shareholder #roups.

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,ssues in desi#nin# a "oard

• The "oard si$e

• The role of the chairman and the /hief

Executive

• Duality in Su"sidairy company "oard

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)oard styles

/oncern for relationamon# directors

/ommitment to effective

communication

Ru""er

stamp

"oard

Representative

"oard

/ountry

clu" "oard!rofessional

)oard