What is the difference in the corporate hierarchy of Directors?

When it comes to Executive and Non-Executive Director (NED) roles, many students, mid-level employees and even senior-level managers are unsure of the differences and overlaps. In this article, we look at the contrasts and similarities between the two corporate functions, the various job categories and industry roles, as well as discuss the CV and skills requirements, remuneration structures, C-suite (Chief Executive) levels, Chairpersons, and Presidents.

The Executive as a Management/Director role

In most Executive roles, you would report directly to the CEO (Chief Executive Officer) of the company. Your responsibilities focus on overseeing the running of the business day to day. Your work will focus on operations and achieving the visions and objectives set out in the various strategic plans.

As an Executive Team, you will be directly accountable to the Company Board and liaise regularly with them. To run smoothly, the organisation needs both structures. Executives do not have legal responsibilities and take their lead from the Board, even when they have helped to determine the strategic direction.

According to Deloitte, in law, there is no real distinction between the different categories of Directors. Thus, all Directors must meet the required Standard of Directors’ Conduct in Section 76 of The Companies Act when performing their functions and duties. It is an established practice, however, to classify Directors according to their different roles on the Board.

The classification of Directors becomes particularly important when determining the appropriate membership of Specialist Board Committees, and when making disclosures of the Directors’ remuneration in the company’s annual report.

The Non-executive Director (NED)

The NED takes on a strategic, board-level position. Reporting to the Chair, they will be collectively responsible for the overall direction, including leadership, governance, and financial assurance.

According to King III Annex 2.3, the Non-executive Director plays an important role in providing objective judgment, which is independent of Management, on issues facing the company. Not being involved in the management of the company defines the Director as Non-executive.

Non-executive Directors are independent of Management on all issues including strategy, performance, sustainability, resources, transformation, diversity, employment equity, standards of conduct and evaluation of performance.

The Non-executive Directors should meet from time to time without the Executive Directors to consider the performance and actions of Executive Management. An individual in full-time employment of the holding company is also considered a Non-executive Director of a subsidiary company unless the individual, by conduct or executive authority, is involved in the day-to-day management of the subsidiary.

There is also a level of risk management when you are a NED. As a Board Director, you are legally responsible for your Executives’ actions and any consequences sit firmly with the Board. You are not just an advisory consultant.

NEDs must listen to all parties, respect the structure of delegation, and provide advice when necessary. You need to know the business inside out and prepare to challenge certain activities. Whilst you will not be involved in the day-to-day operations of the business, you will regularly liaise with the Executive Team.

C-suite Executive job titles

Executive job titles are used to describe individuals who have C-level jobs. The “C” in C-level jobs means chief. C-level Executives are responsible for the strategising and decision-making that contributes to the success of a company or organisation. Each Executive’s responsibilities and daily tasks will vary based on the company they work for.

Executive job titles also include those with President or Director in their job title, and these Executives collaborate with C-level Executives to make decisions and strategise. They also manage and motivate teams for quality assurance and productivity.

Each Executive has their own unique set of responsibilities that often change depending on the industry and company the Executive works for. Most Executives perform many job duties that may not be directly related to their job title.

Tier 1 includes the C-level Executives of a company and is considered Senior Management. These are the highest titles in an organisation, and these titles are given to individuals who have a wealth of knowledge and experience in business management, strategy and marketing. The CEO is the highest title presiding over the other Executives in a business. The COO (Chief Operations Officer) is the second chain of command in an organisation and usually oversees the other Executives. The other C-level Executives are equal to each other in their titles and positions. However, the hierarchy and titles may differ depending on the company or organisation. These titles include:

• Chief executive officer
• Chief operating officer
• Chief financial officer
• Chief information officer
• Chief innovation officer
• Chief strategy officer
• Chief compliance officer
• Chief marketing officer
• Chief talent officer
• Chief human resources officer
• Chief user experience officer
• Chief legal officer
• President
• Partner
• Chairperson

Tier 2 business titles are considered Middle Management of a company. These roles are direct subordinates of Tier 1 business titles. Middle managers are semi-executive positions that are responsible for leading teams of employees and ensuring their productivity aligns with the organisation’s goals. These titles include:

• Vice president
• General manager
• Director
• Manager
• Supervisor
• Assistant manager
• Associate

Chief Executive Officer (CEO)

CEOs are responsible for overseeing the entire C-level Executive team. They also are responsible for making the major decisions, managing the resources and overall operations of a company. A CEO in a large corporation will deal with strategic decision-making that directs a company toward overall growth. CEOs in smaller corporations may deal with the day-to-day functions of a company. A CEO is usually chosen by the Board of Directors and their Shareholders. CEOs communicate directly with the Board and Corporate Operations. They are the visionaries of a company and often set the tone and corporate culture.

Presidents and Chairpersons

Company President

The primary responsibility of the President of a company is often the same position as a COO of a company. They report directly to the CEO and work closely with them to provide the organisation with strategy, vision and financial management. President roles will vary greatly based on the structure of an organisation and what role the Board of Directors requires or prefers a President of a company to have. In some organisations, a President is responsible for implementing corporate goals with a more hands-on approach, and they deal directly with the entire workforce.

Company Vice President (VP)

The primary responsibilities of Corporate Vice Presidents are the second or third in command in a company, depending on the company’s specific structure. Vice Presidents may also have a specific area of expertise that they apply to their roles. This title is similar to or the same as a Chief of Marketing, Chief Information Officer or Chief Marketing Officer. Some organisations have one Vice President or multiple Vice Presidents depending on the size of their company or the industry. Other Vice Presidents work in middle management and deal more directly with the workforce as supervisors of middle management.

Chairperson

According to Michele Havenga from the University of South Africa, the position of the company Chairperson has in recent years acquired considerable significance, although company statutes generally do not provide much guidance on the responsibilities of the company Chair position.

The South African Companies Act authorises any meeting of a company to elect any member to be Chairperson and confers certain rights and duties in respect of meetings on him or her.

The Chairperson’s conduct at the meeting must indicate that he or she is actually exercising procedural control over it. This is done by, for example, nominating who is to speak, dealing with the order of business, putting questions to the meeting, declaring resolutions carried or not carried, in due course asking for any general business, and declaring the meeting closed.

It is mostly left to a company’s articles of association to provide for the powers and duties of the Chairperson. These duties are distinct from the duties of a Director.

However, if a Chairperson is also a Director, they do not cease to be a Director because he or she chairs a meeting of members. And, although the Chairperson has certain duties regarding the procedure at meetings, they may also have wider responsibilities that affect both their fiduciary obligations and the duty of care.

Remuneration for the various levels

The difference between Executive pay and Non-executive pay depends largely on the type of organisation in question, as well as the worker’s job title.

Professional services firm PwC has published its Non-executive Directors report for 2022, highlighting how much top management is earning in the country right now.  The report analysed executive pay during the period from 1 September 2020 to 31 October 2021, focusing primarily on annual remuneration among companies listed on the Johannesburg Stock Exchange (JSE).

• An examination of all fees paid to JSE Non-executive Directors shows that the average salary was R1.75 million for Chairpersons.

“The role of a chairperson requires a large time commitment and an increasing level of involvement as it includes additional work carried out between scheduled meetings, representing the organisation externally and interacting with fellow board members and employees,” PwC said.

• An examination of all fees paid to JSE Non-executive Directors shows that the average salary was R1 million for Deputy Chairpersons.

“Some boards include the position of Deputy Chairpersons. This person assists the Chairperson and fills in at meetings if the Chairperson is unavailable,” says PwC.

• An examination of all fees paid to a range of JSE Non-executive Directors shows that the average salary was R1 million.

Non-executive Directors are required to make up the majority of a Board’s membership and should preferably be independent, according to PwC.

Super-caps

While the above data provides an overview of the average salaries across the JSE, board members at ‘super-cap’ companies – making up the top 10 of the JSE – can expect to earn substantially more.

In 2021 these companies included:

• Prosus
• AB InBev
• British American Tobacco
• Naspers
• Glencore
• Richemont
• BHP Group
• Anglo American
• Anglo American Platinum
• FirstRand

PwC’s data shows that the average salary for a Chairperson at a super-cap is R9.7 million, while the average salary for a Non-executive Director at a super-cap company is R4 million.

Skills and attributes for the various roles

It is important to distinguish between selling yourself as an Executive or promoting yourself as a Non-executive Director. An interviewer will review your successful career in Executive Management, but remember you are not being asked to repeat it. Give emphasis to lessons learned and wisdom gained, and how these can be used to benefit your new position.

1. Non-executive Directors

The role of NED places great emphasis on personality and ability, not just your career achievements. Your CV should demonstrate your independence of mind and readiness to take – and stand by – decisions.

If you opt to focus on NED opportunities in a particular sector – join the relevant trade association, give speeches, and write articles for publication. In short, cultivate a reputation for being a serious thinker about the sector and its future.

To gain effective oversight of a business a NED should be able to demonstrate an understanding of company finance and legal matters.

The market for NEDs is very competitive. Securing your first NED position can be especially difficult – but there are some intermediate steps that will improve your chances:

• Become a school governor – The school governor has exactly the same duties and responsibilities as a NED. Providing the independent viewpoint in managing a school, combined with your business experience, makes you a more rounded NED candidate.
• Take an unpaid role as a NED at a charity or not-for-profit. This will demonstrate your ability to commit, as well as provide valuable experience.
• Try and find a mentor who already holds a Board role. Ask them to share insights into the working of a Board, advise you on your campaign, and provide access to networks of Directors as well as personal referrals.

2. Executive Directors

Managers who aspire to a senior leadership role in the C-suite need a combination of management skills and leadership capabilities. However, not every workplace is able to facilitate the type of learning and growth required for success, which can make career advancement challenging. For many people, being involved in a philanthropic organisation or advancing your education are good ways to gain the necessary knowledge, tools, and perspectives needed to prepare for the C-suite.

Your entry-level CV may have celebrated your communication and interpersonal skills, but your Executive CV needs to clearly show how you’ve developed well beyond this basic description.

Executives don’t just say that they have “good verbal and written communication”, they prove, with concrete examples, how they can negotiate, influence, present articulately to an audience and engage stakeholders.

They show that they can liaise both internally and externally, at all levels, to achieve their objectives.

• The most common hard skill for an Executive is customer service. 19.9% of Executives have this skill on their CV.
• The second most common hard skill for an Executive is digital transformation appearing on 15.1% of resumes. 
• Three common soft skills for an Executive are leadership skills, management skills and time-management skills.

Other important skills for executives include big picture thinking, negotiation, stress management, and information processing.

As we can see, there are various roles in both the Executive and Non-executive positions that have their own unique functions, with each requiring diverse attributes and skill sets.

Sources:

1. www.linkedin.com/in/anne-louise-elliott/?originalSubdomain=uk
2. www.yourarticlelibrary.com
3. www.indeed.com
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8. www.cv-library.co.uk/career-advice/
9. www.teambuilding.com
10. www.zippia.com/executive-jobs/skills/
11. www.pwc.co.za
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