What describes a non-executive director (NED)?

A non-executive director (NED) plays a crucial role in corporate governance and typically serves on the board of directors, providing a balance to the leadership structure. The defining characteristic of a NED is that they bring outside expertise, experience, and an independent viewpoint without being involved in the day-to-day management of the company. They are not employees of the business, which allows them to offer objective guidance and contribute to strategic decision-making without being influenced by internal operational pressures.

This independence is key, as it allows NEDs to focus on oversight and governance roles, such as helping to set company strategy, monitoring performance, and ensuring accountability. Their insights can help organizations improve their governance practices and remain aligned with shareholders’ interests.

The other options describe aspects that do not accurately reflect the non-executive director's role. Full-time employees are typically engaged in the company's daily operations, which contradicts the NED's position. Non-executive directors are specifically independent and not involved in operational management, and they are not required to be shareholders in the company, although they may choose to invest. Understanding these distinctions highlights the unique and valuable role that non-executive directors play in enhancing corporate governance and accountability.