What Is An Executive Director And What Role Do They Play In A Singapore Company?

‍What is an executive director?

Company directors can be broadly categorised as executive directors and non-executive directors (more on this later). An executive director is a salaried employee of the company who is appointed by the board of directors and is a member of the board. They act as leaders of the company and oversee its operations. They also work with the board of directors and senior executives to ensure that the company runs smoothly and achieves its goals and targets.

There are different types of executive directors depending on the role they take on. A managing director, for example, is an executive director who manages daily business operations. To know more about the role and responsibilities of a managing director, you may read our article ‘What Does A Managing Director Do And How Do You Appoint One in Singapore?’.

What is an executive director’s role in a company?

From developing strategy and policy to creating a positive work culture, an executive director’s role is multifaceted:  

• An executive director provides leadership to an organisation and acts as a representative between the company and its board of directors.
• They work with the board of directors to identify opportunities for the company’s growth and financial success and create short-term and long-term strategies and goals to support this endeavour.
• An executive director also has a duty to make sure that the company’s financial resources are being put to the right use. This means they are involved in assessing and managing budgets.
• They provide leadership and mentorship to the company’s employees and are responsible for motivating them to bring their best selves to work.
• One of the key roles of an executive director is to find ways to raise funds for the company. Therefore, they are in charge of setting up fundraising campaigns.

What are an executive director’s duties and responsibilities?

When it comes to the day-to-the day workings of the company, an executive director’s responsibilities include but are not limited to:

1. Overseeing daily operations: Executive directors organise and administer the company’s everyday operations to ensure targets are met, budgets adhered to, and quality standards maintained. Executive directors who have been appointed managing directors create, monitor, and report on business plans that are specific to their departments. 
2. Evaluating performance: An executive director assesses the performance of projects, departments, and key personnel, and evaluates if goals are achieved. If the results aren’t positive, they provide feedback, give orders for course correction, and set standards for improvement.
3. Relationship-building: Being company leaders, executive directors are expected to establish and maintain strategic partnerships with clients, customers, suppliers, lenders, and other businesses that can contribute to the company’s growth.
4. Monitoring market trends: Executive directors must stay on top of industry and market trends to make the most of opportunities and avoid risks. Market conditions might at times drive companies to change directions suddenly. Executive directors with the ability to drive change management can quickly anticipate potential problem areas, develop contingency plans, and navigate the company to safer waters.
5. Leading the board of directors: Executive directors conduct meetings with the board of directors to identify short-term and long-term goals and answer their queries regarding the company’s performance.
6. Legal compliance: Executive directors act as gatekeepers and ensure the company’s practices and policies comply with Singapore laws and regulations. Company directors are responsible for holding the company’s annual general meeting and filing annual returns to the Accounting and Corporate Regulatory Authority (ACRA).

Apart from these responsibilities, an executive director has a duty to:

• Act in the best interests of the company and be honest at all times.
• Avoid conflicts of interest (such as holding financial interest in a rival company) and make proper disclosures.
• Conduct their activities with care and diligence.

Is it compulsory to have an executive director in Singapore?

The only legal requirement to incorporate a company in Singapore is to appoint one local director who has a permanent address in the country. If the company does not have a suitable candidate among its employees, it can appoint a ‘nominee director’. However, most Singapore companies follow a common corporate structure with at least a few executive directors on their board.

Singapore has certain criteria that must be followed when appointing a director (including an executive director):

• They must be a natural person (and not a business entity), 18 years of age or more, and of sound mind.
• They must be financially sound (not bankrupt), not convicted of fraud or crimes involving dishonesty, not disqualified as an unfit director at another company, or a director of a company that ended up being shut down.
• They must have the necessary experience and skills to live up to such a position of authority.

Once appointed, an executive director’s name and details (complete address, contact number, email address, nationality, identification number, date of appointment, etc) must be entered by the company in its Register of Directors. This is mandatory under the Companies Act. Any changes and updates to the entries (for example, the end of a director’s tenure and the appointment of a replacement) must be filed on ACRA’s online filing portal BizFile+ within 14 days.

How is an executive director appointed?

The common practice of appointing an executive director in Singapore is by passing an ordinary resolution (a decision backed by 50% of the votes cast) at a general meeting of the company. The resolution must include the candidate’s name, the date of appointment, and the terms of the appointment. The individual being chosen must also consent to the appointment.

While this is the most common route to naming an executive director, more specific appointment procedures might be laid out in the company constitution, which is a document outlining the rules of governance of the company. These might include the right to appoint an executive director by other directors, shareholders, investors, etc.

How can an executive director be removed?

Similarly, the passage of an ordinary resolution is usually enough to remove an executive director before the end of their tenure for any number of reasons, including poor conduct, lack of leadership, subpar results, conflicts of interest, etc. A 14-day notice is given to both the executive director and shareholders before the meeting. However, the procedure might be slightly different if the executive director’s contract includes a specific removal process. Furthermore, the removal of an executive director is considered complete only after their replacement has been appointed and their details updated with ACRA within 14 days.

Executive directors are also free to quit. They simply need to write a letter of resignation and serve a notice period as per the terms of their contract.

Executive director vs managing director

As mentioned earlier, managing directors are chosen from among executive directors and given the charge of managing the company’s daily affairs. Therefore, the differences between an executive director and a managing director lie mostly in their responsibilities but also in their experience and rank to a certain extent.

1. Responsibilities

Executive directors create and carry out strategy and establish goals and objectives in collaboration with the board of directors. They have the power to make autonomous decisions. Executive directors are also involved in day-to-day business operations but not to the extent a managing director is. They provide leadership to the company and are the central figures in any fundraising effort.

Managing directors are more hands on in their day-to-day dealings. They, too, create business plans and put them to work but they also execute the plans developed by the board. Furthermore, they oversee budgets, hire talent, take steps to keep existing employees happy, attend meetings, make presentations, go on business trips, establish relationships with important shareholders, and speak to the press, among others.

2. Rank

Executive directors are considered the highest ranked executives in a company. They head the board of directors, develop the company’s strategy and goals, and recruit and lead the next rung of leaders. However, they are also answerable to the board of directors.

Managing directors take direct orders from the board of directors and the chief executive officer, if there is one, while heading the company’s department heads and senior managers.

3. Experience

Managing directors are usually considered to have more work experience of the industry and the corporate units they head, which is why they are closely tied to its workings.

Executive director vs managing director – Key differences

Executive director vs non-executive director

After executive directors, the next category of prominent company directors are non-executive directors, who have an entirely different role in an organisation. There are three ways in which non-executive directors are different from executive directors:

1. Role

Non-executive directors are not involved in routine business activities and carry no executive accountability.

2. Place on the board

While being members of the board of directors, non-executive directors are not salaried employees. They are usually hired from outside the company for their knowledge and expertise in various fields such as finance, marketing, law, governance, and so on. Instead of a salary, they receive a director’s fee for their services.

3. Duties

Non-executive directors are hired to perform three major duties:

• To offer advice, direction, and guidance on the company’s performance from an outsider’s perspective. Because they have no involvement in the daily operations of the business, they are considered to be more objective.
• To provide expert advice in their chosen fields. For example, being a non-executive director in Singapore with a legal background would mean familiarity with the Companies Act, its code of corporate governance, industry-specific regulations, and the country’s unique business culture.
• Non-executive directors also act as a counter to executive directors. This includes questioning the executive directors’ decisions and actions and seeking accountability when the need arises. While they stay on the sidelines, non-executive perform the important task of being a company’s moral compass and promoting responsible and ethical business.

Executive director vs non-executive director – Key differences

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