Non-Executive Directorship

A non-executive director (NED) can provide substantial benefits to any company, whatever size it is. In fact there is a very strong argument that a NED will add more value to a smaller company as it will be strengthened proportionally more by the skills and experience the NED brings to it compared to a larger business that already has a depth of senior management skills due to its size. The key benefits or areas of NED assistance include the following:

  • Facilitate strategic planning   
  • Development of corporate vision, culture and structure
  • Management of growth and avoidance of the pitfalls   
  • Recruitment of key managers
  • Help with resolution of difficult and confidential issues
  • Preparation for raising of finance, M&A and exits
  • Provides useful contacts
  • Building more credibility with investors and other funders such as banks
  • Act as a mentor for executives or teams, to inspire and promote fresh thinking; healthy challenging of senior managers
  • Act as MD’s sounding board, clearing the fog, provides balance
  • Conversant with directors’ legal duties, responsibilities and reporting requirements

A NED will attend board meetings, and with growth companies we recommend that these are held monthly, in a more informal management committee style than anything too formal. The NED will also be available at other times, as necessary, for example to help with senior recruitment. The input will be of real, practical value. Quite often within smaller companies, a NED will fulfil the role of part time finance director as well.

A NED is not there to challenge everything the company does or as a supervisor to make sure that all boxes are ticked. He is there to help, guide and motivate in any way that leads to the successful long term development of the company.

Availability of an adviser as a NED is flexible and utilisation is up to the client, although there would be a minimum retainer fee covering one day per month for at least one year.

NED attributes

We welcome the increased professionalism required of NEDs following the various reports on corporate governance, from Cadbury to Higgs. Although the rules apply principally to listed companies, the ethos of diligence and accountability is universal. All NEDs need to display certain key attributes to carry out their role properly, and in our view these include the following -

  •     Independence
  •     Good judgment
  •     Well-balanced
  •     Objective
  •     Unbending integrity
  •     Committed
  •     Communication skills
  •     Knowing when to dig deeper
  •     Politically sensitive
  •     Robust and resilient
  •     Experienced
  •     Can size up issues
  •     Can keep things in perspective