To attain the objectives prescribed in the Memorandum of Association of the company, the company depends on Board of Directors (collectively) and directors (individually). Directors of a Company are its eyes, ears, brain, hands and other essential limbs.
Independent Director
The Cadbury Committee in 1992, which itself was set up following the corporate scandals involving BCCI, Poly Peck and Maxwell, provided respectability to the concept of independent directors, by focusing on independent directors as a part of the new practices for better governance. Independent directors function as an oversight body in monitoring the performance and should raise red flags whenever suspicion occurs. They are expected to be more aware and question the company on relevant issues in their position as trustees of stakeholders. The institution of independent directors is a critical instrument for ensuring good corporate governance and it is necessary that the functioning of the institution is critically analysed and proper safeguards are made to ensure efficacy. Companies Act 2013 mandates appointment of independent directors by listed companies and other classes of companies. It also prescribes other aspects such as maximum tenure of independent directors, separate meetings of independent directors, tenure, their qualifications, liability, appointment, remuneration, etc. The Central Government has exempted section 8 companies from the requirement of appointment of Independent Director.
Executive Director
An executive director holds a position on the executive board. They have “executive responsibility” for running the company’s business. They will typically be elected by employees and shareholders and might be an employee, officer or stakeholder in the company. Other directors may be representatives of, for example, an institutional investor or a union.
Difference Between Executive Director and Independent Director
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