When we’re approached about non-executive directorships (NEDs), whether that’s by a potential NED candidate or a company that wants a NED on their board, we’re often asked similar questions.
With that in mind, we thought we’d answer the most common NED questions we get at City CV…
14 commonly-asked questions about non-executive directorships
1. What is a NED?
A NED, which stands for non-executive director, sits on a company’s board of directors as an independent advisor.
Non-executive directors aren’t typically employed by the company, nor do they play a day-to-day role, but they take a strategic position and play an important part in helping a company achieve its objectives, frequently in policymaking, planning and strategy.
2. What makes a good NED?
A good NED offers a company some (or all) of the following skills, experience and characteristics:
- Impartial and valuable advice
- Expertise and capability in a specialist field
- High emotional intelligence and understanding of board dynamics
- Influence with the gravitas and diplomacy to challenge the status quo
- Clear-sightedness and confidence to scrutinise performance
- Keen evaluation skills
- Understanding of governance and regulatory frameworks
- Independent mindset and a balanced view
- Resilience and adaptability
3. What are the benefits of a non-executive directorship to an individual?
Taking a NED role offers an individual many benefits, amongst which are:
- Accelerating your executive career to the most senior level and helping prepare you for your next big role in the boardroom
- Building your network, leadership skills and business acumen
- Professional satisfaction
- The opportunity to work for a company with a cause you care about
- Financial reward (see point 10)
4. What are the benefits of a non-executive directorship to a company?
A NED on your board can play a strong part in helping your company reach its goals. Other benefits to a company include having a fresh perspective, someone who has ‘been there, done that’ and someone who can hold you to account. As individuals typically become NEDs late on in their career, they’ll probably also have an extensive network of contacts you can leverage.
5. What to consider before taking a NED role
Firstly, look at your career profile and think about what you want to get out of taking a non-executive directorship. Do you want financial reward, professional satisfaction, to ‘keep your toe in’ as you edge towards retirement? Think about how much time you can commit to, and whether you would like to serve on the board of a particular type of company.
Once you’ve narrowed down your options, look at the companies themselves. What are the current board members and NEDs like? How do they work? What do the company’s financials, strategy, governance and reputation look like? What could you offer of value to them?
6. What are the risks of being a NED?
The main risk you have to consider if you’re taking on a non-executive directorship is the amount of liability you have in the company. Even though you’re not technically directly salaried by them – you would normally receive a ‘directors’ fee’ instead – you may still be under personal liability in cases of negligence or fraud since you sit on the board.
But you can take steps to combat this. Make sure you do your due diligence on the company before you join them, and when you’re on the board, keep track of all the advice and guidance you provide. If you spot anything amiss, it’s your responsibility to report it to the relevant bodies or authorities.
7. What qualifications do you need to be a non-executive director?
There aren’t really any specific qualifications you need to become a NED. What you do need is experience, expertise in certain areas the company needs guidance in and the ability and confidence to hold the board accountable.
8. How many NED roles can you do?
There isn’t an official limit on how many non-executive directorships you can hold at the same time. That said, if you’re considering taking more than one NED role, it’s important to think about how much time you can commit to each. According to The Times, four NED positions is probably the maximum you can take on while still adding value to each company.
9. How do I learn to become a non-executive director?
There are three steps you can take that will help you find a NED position that’s right for you (find out more about each step in our related article, Three steps to becoming a paid non-executive director).
- Unlock your value – know the specific skills and personal qualities you will bring to a board
- Make sure your CV and online assets are board-ready
- Maximise the value of your network
10. Do non-executive directors get paid? How much?
While not all NED roles are paid – especially in the case of charities or not-for-profits – most are paid a director’s fee and/or include stock options. This clearly varies depending on the type of company. A NED at a start-up is more likely to be given stock options, whereas a NED in a large global corporation will probably pay more (and you’ll likely have to work more days).
Your financial reward is also tied to the sector. Tech, finance and consumer sectors tend to offer better remuneration, and, according to Glassdoor, the average rate for a NED on a company board is £85,704 (although it’s not clear how many days’ work that entails).
11. How do I get a NED role?
According to a survey on board appointments, 65% of non-executive directors get their roles through their network. The remaining 35% mainly become NEDs through either being headhunted or answering ads. This really highlights the value of building connections and using platforms like LinkedIn.
If you’re new to the NED role, it may also help if you can offer pro bono work or mentoring, or explore consultancy as a way into a new company so that you are front of mind when that business develops and they need top level guidance and support.
12. How to prepare for a non-executive director interview
Interviews for non-executive directorships can be intense, but you’ll be in a strong position if you can demonstrate that you understand key business drivers and are confident enough to challenge decisions in a constructive way.
Like many other executive roles, personality can play a part. For NEDs, it’s about being assured without being arrogant. Integrity and ethical resilience are also important. These qualities add to the image you build and will demonstrate culture fit. Another characteristic to demonstrate is diversity of thinking and a different perspective.
Want a solid foundation for progressing your journey to your first non-executive director role? Take a look at our tailored executive coaching options.
13. What’s the difference between executive and non-executive directors?
Both executive and non-executive directors sit on the board, but executive directors manage the day-to-day running of the company while NEDs provide guidance and advice based on their experience and expertise. Executive directors typically work full-time, whilst non-executives may only work a couple of days a month and aren’t directly employed by the company. One reason for this is that they can remain independent.
14. How do you appoint a non-executive director?
You can appoint a NED in exactly the same way you would an executive director (there’s no legal distinction between the two). In terms of finding a suitable individual to hire as a NED for your company, there are several ways you can go about this.
Firstly, look to your network; it’s entirely possible that the right person is already in your connections. You could also hire an executive search firm to find suitable candidates, or contact NEDonBoard, the UK’s professional body for non-executive directors.
Are you considering a NED role?
The expert team at City CV can help you create your NED CV for maximum success, highlighting the experience you can bring to a board and the value in your skills and expertise.
We also offer tailored executive coaching which will give you a solid foundation for progressing your journey to your first non-executive director role.
Finally, remember a non-executive director role places great emphasis on personality and ability, not just your career achievements. We’re skilled at identifying the right qualities and reflecting these in your LinkedIn profile and executive bio to help you stand out – and then be comfortable blending in.