To incorporate a company in Singapore, you need at least one director who is a local resident. But most companies here have more than a few directors in its ranks, with each one given charge of a specific function. Executive directors are the senior-most executives in any organisation and this article explains in detail their role and responsibilities, and the qualities that are required to be one.
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?’.
From developing strategy and policy to creating a positive work culture, an executive director’s role is multifaceted:
When it comes to the day-to-the day workings of the company, an executive director’s responsibilities include but are not limited to:
Apart from these responsibilities, an executive director has a duty to:
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):
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.
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.
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.
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.
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.
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.
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.
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:
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.
Non-executive directors are hired to perform three major duties:
For information on company incorporation in Singapore, read our detailed guide.