As entrepreneurs most of us operate companies, especially in property developments which requires a certain degree of business acumen. Ever thought that your weakest link might be that ‘You don’t know what you don’t know’. I know from several decades of running companies that one of the great strengths in business is humility – humility to reach out for advice, to understand that there could be a better way to evolve and improve.
One little known, but incredibly powerful option open to company directors is that of engaging a Non-Executive Director (NED). I first became a NED in 2007 and subsequently have held over 7 NED roles over the last 10 years in sectors varying from Property Development, Power, Retail, Engineering, Water and Energy sectors.
So what is a NED? The role of a NED is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors.
A NED is expected to focus on board matters and not stray into ‘executive direction’, therefore providing an independent view of the company that is removed from the day-to-day running.
NED’s are appointed to the board to bring:
- Wide experience
- Special knowledge
- Personal qualities
The key responsibilities of a Non-Executive Director
Directors should use their NEDs to provide general counsel, different perspective on matters arising, matters of anticipation, their strategic planning and areas of concern. They should also seek their guidance on particular issues before they are raised at board meetings. Key responsibilities of NEDs include the following:
- Strategic direction: Strategically a NED can provide unbiased, refreshing insight and questioning and informed contribution and to act as a constructive critic in looking at the objectives and plans devised by the executive team.
- Monitoring performance: Non-Executive directors should take responsibility for monitoring the performance of executive management, examining progress towards achieving company strategy and objectives.
- Remuneration: In larger companies, an NED might also be responsible for determining appropriate levels of remuneration of executive directors. In smaller companies your NED will work closely with the executive team to examine compliance and offer insight and suggestion as to approach required.
- Communication: An NED can help connect the business and board with networks, people and organisations who may compliment and enhance the effectiveness of the company. A NED may be requested to represent the company externally.
- Risk: NEDs should ensure the Board has the integrity of financial information, controls and systems of risk management in place & that they remain robust.
- Audit: An NED has an important role as part of the board to ensure that the company accounts properly to its shareholders through a true and fair reflection of its actions and financial performance and that the necessary internal control systems are put into place and monitored regularly.
So when considering how YOU will enhance the high performance culture and results of YOUR business it is worth considering what an NED can do for you. Examine their credentials carefully, their track record and previous experience as not just a NED but also as a company director – it is incredibly useful, if not invaluable, to have the experience of an NED who has been in a similar position to you many times before.