The non-executive director’s checklist
Embarking on a career as a non-executive director (NED) is not for the faint hearted but training and preparation for the role makes it a highly rewarding experience.
As Farzana Baduel points out in her excellent blog post How to land a non-executive director role and what to do when you get there: “Each board position on my CV reflects countless rejections.”
Outside of her points about needing a relentless focus and the value of networks, the key to success is training and development so you are primed and ready to discharge your duties, both legally and as an important independent company asset.
According to the Institute of Directors, the difference between a good director and a great director is the company you keep.
I’m an ambassador for the membership body, which sets the standards for professionalism and good governance. Having recently completed the course, I can vouch for its Certificate in Company Direction, which is the first step on the path to becoming a Chartered Director.
This rigorous training into high performance leadership delivers insights into:
The role, responsibilities and legal duties of a business director
The characteristics of an effective board
Financial terms and concepts
Issues and processes involved in formulating strategic business plans (and you can see some of the teaching put into practice here)
How leaders create influence and impact within and beyond their organisation
Equally, I’ve completed non-executive director training with the Non-Executive Directors’ Association (NEDA), which sets out the expectations of NEDs as follows:
“NEDs have a role in strategic decision-making, monitoring the performance of management and the financial reporting process, the review of risk and controls, and (through committee work) the remuneration of top executives and the appointment of new directors.”
In The Independent Director: The Non-Executive Director’s Guide To Effective Board Presence, Gerry Brown goes further.
Brown says: “An independent director is both a coach and a referee. He or she acts as a guide, mentor, and wise counsellor to the firm’s executives.
“Good independent directors bring with them a wealth of knowledge from their own executive careers. They bring examples of best practice they have seen elsewhere; they recommend trustworthy consultants and advisors; they bring experience of working in different sectors and global markets, which the existing team may not have. They help guide and shape strategic thinking, perceptions, and understanding of risk.
“The one thing they do not do is get involved in day-to-day management; that is the province of the executive, and the boundary between their separate roles must always be respected.”
So what should every NED consider when approaching a new role? Here’s a five point checklist:
Be curious. Do your research about the business. Bearing in mind Brown’s advice above, be sure you have the relevant experience needed by the company. Specific skillsets will often be part of the job role advertised so make sure you can provide examples of what’s being asked for.
Be informed. A whole host of data can be found online so there’s no excuse for discovering too late about any financial or regulatory impropriety. Executive and non-executive directors have the same duties and responsibilities under UK law and may be equally liable if duties aren’t discharged appropriately.
Be honest. Check the commitment and that you can deliver. There will always be a basic time commitment, but good NEDs make themselves known within the organisation to stay abreast of developments and can also be drawn in when issues management is required. It’ll always be more than you initially think.
Be involved. Understand the governance as much as possible, as early as possible. Talk to other NEDs and members of the executive team as a priority. If you can, evaluate the effectiveness of the chair as this person’s management style will impact how effective the board is. Overpowering chairs can stifle debate and drive personal agendas, weak ones can create a different type of dysfunction.
Be protected. Ensure when taking a new position you have a formal contract which outlines your role in detail. Also make sure the company has a Directors and Officers (D&O) policy in place so there is some legal protection in the event of an action resulting from a wrongful act.