As experts in the NED recruitment and branding space, we write CVs and LinkedIn profiles, in addition to providing NED career coaching support for our clients. We have put together this piece to enhance your knowledge and your chances of launching and expanding your non-executive director / NED career – whether you are an aspiring or established NED.
Part One describes non-executive director functions and NED responsibilities.
Part Two provides guidance on assessing your professional skills, qualifications and personal qualities, and outlines what you can do to get completely board ready.
Today’s business environment is more favourable than ever before for individuals exploring non-executive director (NED) roles. Companies are actively looking for NEDs with top-tier experience in a range of technology / digital sectors who can identify future trends, highlight competitive advantages and boost profits. NEDs need to be acutely aware of the complex cultural, technical and people challenges that face organisations today and provide the agility, wisdom and insight to help overcome them.
PART ONE:
What does a Non-Executive Director do?
A non-executive director’s primary function is to provide independent oversight, governance and constructive challenge to an executive board on issues of policymaking, planning and strategy. NEDs are appointed for their wealth of business experience, specialist expertise and creativity. They make a pivotal contribution to board decision-making and help to shape a strong, sustainable organisation. In short, the role demands objectivity, courage and total commitment – it is not for the faint-hearted.
NEDs are members of a company’s board but are not part of the executive. They are not full-time employees and play no part in day-to-day company management. Instead, they focus on representing stakeholder interests and monitoring executive performance.
It is important to note that there is no legal distinction between executive and non-executive directors. NEDs are subject to the codified duties of directors contained in the Companies Act 2006 in the same way as executive directors. They have the same responsibilities and potential liabilities as their executive colleagues and must demonstrate the same commitment to corporate success.
Most NEDs receive compensation for their time in the form of expenses, equity or fees. The amount paid reflects the amount of time they spend working for the organisation, their experience and their portfolio of valuable industry connections. They may also be asked to provide paid consultancy service in addition to their regular NED commitment.
The time commitment depends on the organisation but is usually between 12 to 25 days a year. Average tenure tends to be about four years.
What does a NED bring to the board?
The impartial and independent perspectives offered by a NED enable a board to operate more effectively. Because NEDs are not involved in routine company duties, they can take a more objective and high-level view of C-suite plans and objectives, challenge these where appropriate and make sure the organisation is operating as efficiently and as profitably as possible.
NEDs are appointed not just for their specific expertise in a particular field but also for their broad experience across different business areas. Many NEDs can demonstrate successful portfolio careers that span multiple industry sectors, such as finance or corporate governance. They can access a wide range of professional networks and valuable relationships and provide significant benefits, such as information on business opportunities, new ways of working and acquisition of high calibre executives.
In summary, NEDs are strategic thinkers with the expertise to see the big picture without getting bogged down in operational detail. Their broad approach and independence are vital, allowing them to anticipate and future-proof company performance and assess long-term goals and strategic direction.
Major NED responsibilities
NEDs provide general counsel to Chief Executives and Board Chairs, with guidance on certain issues frequently sought before these are raised at board meetings. In listed companies, many of the main specialist roles of a NED will be enacted in board sub-committees. Main responsibilities include:
- Strategic guidance: NEDs offer alternative views and clear perspectives on external factors that might impact on a company’s business operations. Their role is to look at the plans devised by the Chief Executive and his or her executive team and provide creative, constructive criticism.
- Corporate governance: This refers to the processes, practices and controls that enable a company to deal with economic and social challenges and meet its business objectives in a responsible and ethical manner. Good governance provides a sound and balanced infrastructure that enhances the quality of decisions made by management and the board and meets the interests of all stakeholders. To provide effective support, NEDs should ensure that the company operates within a strong and principled governance framework that merits the trust of its stakeholders.
- Performance monitoring: NEDs take responsibility for reviewing executive management performance, especially relating to the progress made in achieving the company’s strategy and objectives. They are tasked with determining executive directors’ level of remuneration and are responsible for executive director appointments and removals, as well as succession planning.
- External contacts: A business can benefit considerably from external contacts and opinions. The NED is able to connect the business and board with useful networks of people and organisations and act as the company’s external representative.
- Risk assessment: NEDs need to satisfy themselves on the integrity of financial information and ensure that financial controls and risk management systems are sound and robust.
NED skills checklist
Financial and governance expertise and commercial experience are basic requirements for all NED appointments, but the role demands a great deal more. Successful appointees must be able to demonstrate a broad range of key personal qualities that complement their business background and will greatly enhance their value to the board.
- Communication and interpersonal skills – sensitivity, cooperation, collaboration, diplomacy, articulate and a good listener with the capacity to appreciate different points of view,
- Integrity – high ethical principles, standing up for what is right rather than most expedient and a strong commitment to company values.
- Critical thinking and creativity – the ability to think strategically and take the ‘big picture’ approach.
- Sound judgement – evaluating and analysing information fast and efficiently, asking probing questions and reaching wise and considered conclusions.
- Diplomacy and courage – the power to challenge when necessary and the gravitas and confidence to maintain this position and deal gracefully with conflict.
- Commitment and energy – demonstrating the tenacity and resilience to succeed even in difficult and demanding circumstances.
Read Part Two: How can a NED position benefit you?