Difference between non-executive and independent directors

CFA Level I Corporate Finance
#1

I could not properly understand how an independent director(ID) is different from a non-executive director(NED). Here’s what I do understand (correct me if I am wrong):

  1. ID are a type of NED.
  2. ID do not work for the company.
  3. IDdo not have a material interest in the company.

But all of these points also seem to apply to NED. So how exactly do they differ?

#2

Independent directors have no relationship with the company, non-executive directors, while not executives could have a relationship.

It probably makes the most sense with an example. A non-executive director could be an employee representative, or perhaps someone with some ties to a significant supplier/customer. Would it be right to call these non-executive directors independent directors? It would not.

An example of an independent director, for example, could be a CFA charter holder who was appointed to head the boards investment committee with no prior interactions with the company.

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#3

Thanks a lot! The example really cleared things up.

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