Strategic Business Leader · The board of directors

Executive and Non-Executive Directors for ACCA SBL

Updated 11 October 2026 · Fact-checked

Executive directors run the business day to day and are usually employees. Non-executive directors (NEDs) are not employed in management. They challenge, advise and oversee, and independent NEDs protect shareholders from management bias. Governance codes separate the chair and CEO roles so that no one person holds unchecked power over the board.

Understand Executive and Non-Executive Directors

A board of directors is made up of two broad groups. Executive directors work full time in the company. They hold senior management jobs such as CEO, finance director or operations director. They run the business and carry out strategy. They are paid a salary and often bonuses and share awards.

Non-executive directors (NEDs) sit on the board but do not manage the company daily. They attend board and committee meetings and are paid a fee. Their value comes from outside experience and an objective view. They have the same legal duties as executive directors. They are not junior board members.

Codes of governance describe four main NED roles. First, a strategy role: contribute fresh ideas and challenge the executives' proposals. Second, a scrutiny role: monitor management performance against agreed goals and check the accuracy of information. Third, a risk role: test the integrity of financial information and the strength of internal controls and risk management. Fourth, a people role: set executive pay and take part in appointing and removing senior managers, mainly through the remuneration and nomination committees. NEDs also chair or sit on the audit committee.

A NED only adds value if they are independent. Independence means no relationship or circumstance that could affect, or appear to affect, their judgement. Typical warning signs are: being a former employee of the company in recent years, having a material business link with it, receiving pay beyond the director's fee (such as share options or a pension from the company), close family ties to directors or advisers, holding a large shareholding or representing a major shareholder, sitting on the board for a very long time (the UK Code uses nine years as a signal to examine), and cross-directorships with an executive. The test is about substance. Even if a NED looks independent, the board must say how it decided.

The chair leads the board. The CEO leads the management team. Codes say these roles should be held by different people, and that the CEO should not go on to become chair of the same company. A split gives a balance of power. The chair controls the agenda and makes sure NEDs get good information and time to debate. The CEO is held to account by the board. If one person holds both roles, that person sets the agenda for a board that is meant to monitor them. This is a risk of a dominant individual. A split is not a guarantee, though. A weak chair, or a chair who is too close to the CEO, can still let the CEO dominate. Codes also recommend a senior independent director as an alternative contact for shareholders and NEDs.

Key rules to remember

Executive director: Executive director = board member + employed in a senior management role; Runs the business day to day and implements strategy. Paid salary and performance-related pay.
Non-executive director: NED = board member + not employed in management + paid a fee; Roles to remember: strategy, scrutiny, risk, people. Same legal duties as executives.
Independence test: Independent NED = no relationship or circumstance likely to affect, or appear to affect, judgement; Judge by substance. Look at employment, business links, extra pay, family, shareholding, length of service and cross-directorships.
Chair/CEO split: Chair leads the board; CEO leads management; roles held by different people; Purpose: balance of power and no individual with unfettered decision-making power. Codes also say a CEO should not become chair of the same company.

How to solve Executive and Non-Executive Directors questions

Use this method for any question on directors, NEDs, independence or the chair/CEO split. Anchor every point in the scenario.

1Read the requirement and note the verb. Is it describe, assess, evaluate, advise or recommend? Note who the audience is, such as the board, a shareholder or the chair.
2Identify the directors in the scenario. List who is executive, who is non-executive, who is chair and who is CEO. Note any dual roles.
3Pick the right framework: NED roles (strategy, scrutiny, risk, people) for a role question; independence indicators for an independence question; balance of power for a chair/CEO question.
4Pull out facts from the scenario that match each point. Look for length of service, share options, business ties, family links and who controls information.
5Apply each fact. State the point, link it to the fact, then explain the consequence for governance, such as weak challenge or bias towards management.
6Weigh the evidence. Say whether the NED looks independent or not, or whether the structure is a problem, and note any mitigating factor.
7Recommend practical action: appoint truly independent NEDs, split the roles, name a senior independent director, review board composition. Say who should act.
8Check professional skills. Keep a clear structure, a balanced view and a tone suited to the reader.

Quickest way: Four-lens scan for director questions

When to use it: Use when you have little time and need a quick structure for a question on the board, NEDs or the chair/CEO split.

Write four labels: Roles, Independence, Chair/CEO, Fix.
Under Roles, jot the NED role that matters most here (strategy, scrutiny, risk or people).
Under Independence, scan the scenario for the warning signs: long service, extra pay, business or family links, major shareholder.
Under Chair/CEO, note who holds each role and whether power is concentrated.
Under Fix, write one action per problem found, such as replace, split, add a senior independent director or change the committee make-up.
Write the answer in that order, each point tied to a scenario fact.

Common mistakes in Executive and Non-Executive Directors

Saying NEDs have fewer legal duties than executive directors.
Because NEDs are part time, students assume they carry less responsibility.
Fix: State that all directors share the same legal duties and are collectively responsible. NEDs differ in role and involvement, not in legal status.
Listing NED roles from memory without applying them to the scenario.
Students learn the four roles as a list and write them out in full.
Fix: Choose the roles the scenario makes relevant and link each to a fact. Professional skills marks reward application.
Treating a NED as independent because they are not an employee.
Students check only one indicator.
Fix: Check all indicators: past employment, business ties, extra pay or options, family, shareholding, time on the board and cross-directorships.
Claiming that splitting chair and CEO guarantees good governance.
The split is presented as a rule and students overstate it.
Fix: Say it reduces the risk of concentrated power. Add that the quality and independence of the chair still matter.
Confusing the chair's role with the CEO's role.
Both are senior and both speak for the company.
Fix: Chair leads the board and its agenda; CEO leads management and carries out strategy. Use that line in every answer.
Ending with a criticism and no recommendation.
Students run out of time or forget the requirement asks for advice.
Fix: Always close with specific, practical actions and name who should take them.

Worked examples

Example 1

Kavala Foods plc has a board of seven. The CEO, Mr Rao, has also been chair for eleven years. Of the three NEDs, one is a former finance director who left the company three years ago, one has held share options in the company for six years, and one is a partner in the law firm that earns significant annual fees from Kavala. Evaluate the independence of the board and recommend action. (10 marks)

Show the solution

Identify the roles. Mr Rao is both chair and CEO. He leads the board and the management team, and he has done so for eleven years. Power is concentrated in one person.
Apply the chair/CEO point. The board is meant to hold the CEO to account. With one person in both roles, he sets the agenda and controls the information that NEDs receive. Challenge is likely to be weak.
Assess NED 1. A former finance director who left only three years ago is likely to have close ties with current executives and may defend decisions made while in office. Independence is doubtful.
Assess NED 2. Share options that are performance-linked give the NED an interest in the share price like management, which can affect objectivity. Independence is doubtful.
Assess NED 3. A law firm earning significant fees from Kavala is a material business relationship. The NED has a financial interest in keeping the company as a client. Independence is doubtful.
Conclude. None of the three NEDs can be clearly regarded as independent, and the chair/CEO combination removes the main check on management. The board is unlikely to provide effective scrutiny.
Recommend. Split the roles by appointing a separate chair. Appoint at least some NEDs with no past or business links and no options. Name a senior independent director. Ensure the audit, remuneration and nomination committees are made up of independent NEDs.

Answer: The board lacks independence. Mr Rao holds both chair and CEO roles, and each NED has a link (recent employment, share options, material fees) that could impair or appear to impair judgement. Kavala should split the roles, appoint genuinely independent NEDs, name a senior independent director and staff the key committees with independent NEDs.

Example 2

Explain to a newly appointed NED of Brightwave Ltd, a first-time board member from a technology background, what her role is and how it differs from that of the executive directors. (8 marks)

Show the solution

Open with the main difference. Executive directors are employed in management and run Brightwave day to day. She is not. Her role is to oversee and advise, not to manage.
Strategy role. She should bring her technology experience to challenge and develop strategy proposals, not simply approve what the executives present.
Scrutiny role. She should monitor how well management is meeting agreed targets and check that the information she receives is complete and accurate.
Risk role. She should satisfy herself that financial reporting is reliable and that internal controls and risk management are robust. She may serve on the audit committee.
People role. She may sit on the remuneration and nomination committees, which set executive pay and take part in appointing and removing senior managers.
Add the legal point. She has the same legal duties as the executive directors and shares collective responsibility for board decisions, so she must prepare properly and speak up.
Add the independence point. To be effective she must stay independent, so she should avoid accepting extra pay or business ties with the company.

Answer: Executive directors manage Brightwave daily. The NED oversees and advises through four roles: strategy, scrutiny, risk and people. She carries the same legal duties as executives, and her value depends on staying independent and willing to challenge.

Exam tips

In SBL, always tie each point to a named person or fact in the pre-seen or exam scenario. A generic list of NED roles earns little.
Check independence indicators one by one. Use the scenario's details on service length, pay, links and shareholding as evidence.
Balance your view. Note a mitigating factor, for example a long-serving NED may bring valuable knowledge, before concluding.
End with practical recommendations. The professional skills marks reward commercial advice that a real board could act on.
Keep the answer short and structured when time is tight. Use headings such as Roles, Independence and Chair/CEO.

Practice questions from The board of directors

Executive and Non-Executive Directors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Executive and Non-Executive Directors: frequently asked questions

What is the difference between executive and non-executive directors?

Executive directors are employed in senior management and run the company daily. Non-executive directors are not employed in management. They attend board and committee meetings, challenge management and oversee performance. Both groups have the same legal duties.

Why should the chair and CEO roles be separate?

Separate roles balance power. The chair leads the board and the CEO leads management, so the board can hold the CEO to account. If one person holds both roles, no one is positioned to challenge them. A split helps but does not guarantee good governance.

How do you assess the independence of a NED?

Look for relationships or circumstances that could affect, or appear to affect, judgement. Examples are recent employment, material business ties, extra pay or share options, family links, a large shareholding, long service and cross-directorships. Use the scenario facts as evidence.

Do non-executive directors have fewer responsibilities than executives?

No. They share the same legal duties and collective board responsibility. Their role differs because they oversee and advise rather than manage. They also have specific tasks on committees such as audit, remuneration and nomination.