Recruiting directors

The different types of director

A director is defined in law according to what they do, rather than their actual job title. Even a person not formally appointed to the board might be deemed a director if their role could be considered that of a director, or if they have acted as a director. This is what is known as a shadow director.

Directors are responsible for ensuring the success of the business and compliance with relevant regulation such as health and safety, employment law, tax and corporate governance. See our guide on company directors' responsibilities.

There are two types of director, executive and non-executive.

Executive directors perform operational and strategic business functions such as:

• managing people
• looking after assets
• hiring and firing
• entering into contracts

Executive directors are usually employed by the company and paid a salary, so are protected by employment law and are taxed through the PAYE (Pay As You Earn) system.

There is no legal distinction made between executive and non-executive directors - the difference is that non-executive directors do not get involved in the running of the business. They use their experience and expertise to provide independent advice and objectivity and have a role in monitoring executive management.

A non-executive director might be appointed to carry out a specialist role on a part-time basis or for their expertise in specific activities, such as strategy and contract negotiation.

They may be regarded as employed by the company or self-employed under a contract for services, depending on the terms and conditions of engagement. They usually work part-time, attending board meetings and spending time on specific projects.

Non-executives bring an objective view of the business, can improve the board's effectiveness at relatively low cost and provide valuable business connections.

Subjects covered in this guide

• Introduction
• The different types of director
• Structuring the board
• Choosing a director
• The recruitment process
• Appointing and remunerating directors
• Get the most from your directors
• Here's how I recruited directors with different and complementary skills

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