To the enchanted world of NEDs, you are welcome.
This role may not be the proverbial ‘walk in the park’, as much as a meandering journey that engages your senses.
It is also a journey you are best prepared for.
As a NED, be prepared for unexpected events, risks, new challenges, bends in the road and opportunities that need careful evaluation. Even the board agenda will have to be carefully crafted. You will need to adopt an inventive approach and be prepared to go the extra mile.
Let not the word non-executive mislead you, there is work to be done. As a NED, you are not responsible for day-to-day decision making or operational aspects of the business. Yet, you are very much responsible for directing the affairs of a company and leading it to success. As Larry Putterman puts it, ‘fingers out, eyes in’ principal; essentially reminding NEDs that their job is not to run the company but to set policy, appoint and manage the executive team.
The legal duties, responsibilities and liabilities for NEDs remain the same as those of the Executive directors. EDs and NEDs both have a fiduciary duty to the company/ shareholders and must act in their best interests.
Unmistakably, primary role of the non-exec is strategic. NEDs will need to provide constructive challenge, effective guidance and strategic direction to the management team. They will need to be aware of industry trends and board room themes, identify emerging trends and risks within the organisation, scrutinise management plans & performance, ensure appropriate metrics and risk measures are in place and that information on all aspects is adequately and transparently shared.
A vibrant, responsible board is important. With the right blend of energies and trust between the NEDs, the CEO, chair and other board members, there is no telling how far the organisation may go.
As you learn new skills, get insights into new industries, network and build relationships, you’re also making significant contributions and participating in an evolving organisational saga. You just might find yourself signposted in history, as a figure of excellence and a shining board room warrior.
As a trustee for charitable institutions, I have certainly found myself very fulfilled with the content of my role and have been able to enthusiastically engaged in constructive dialogue to build a future. Please remember, how you adapt to this role and make it work for you is completely up to you. As a NED, you will determine your own and the organisations success. Ultimately each NED forges an individual path.
This can turn out to one of the more rewarding and meaningful career paths for you; with a few careful actions from you. Organisations are looking for diverse, highly motivated board members who’re able to add value to the organisation and bring a great deal of personal integrity into the mix.
Here are a few tips for new / existing NEDs
- Make sure you understand your motivation for wanting to be a NED and what you hope to achieve with the role. This will help to in weighing up opportunities and create a playbook for your role in the board room.
- You might like to know the kind of industry or sector you would like to be involved in. These may be based on where your interests and /or experience lie. Even within the non profit domain, there is a lot to choose from: healthcare, education, design, housing, research etc.
- Be prepared, as you embark on this journey. When you apply for new roles, do the research on the organisation and what skills the board needs at that point in time. This can help you in better presenting your candidature; highlighting specific skills and relevant experience when applying. Research, talk to existing board members, review the accounts and ask plenty of questions. Are there any on-going concerns that you need to know about?
Paul Munden of the IoD, UK recommends that you speak to the chairman of the board before you apply to a role so as to get a better understanding of the risks and issues the board faces. This can enrich discussions and help you highlight specific items that you bring to the board.
- Once you’re on the board, you would need to get an understanding of the organisation, its culture and its current realities. It makes sense to ask for minutes of past meetings, 3 year financials, articles and memorandum, audit reports, history of banking relationship, health and safety reports, shareholder agreement, insurances, service contracts of executive board.
- Be prepared to demonstrate a high level of personal integrity, strong values and ethics.
- As you go about board meetings, be prepared with your questions and keep your critical thinking handy. It will go a long way in delivering on your ‘duty of care’.
- You may also like to invest time outside of board meetings to get a sense of what is going on within the organisation.
- When you are in board meetings, don’t just focus on subjects that you feel comfortable with, such as finance. You need to be able to take a broad view of the company’s strategy and be willing to contribute to the debate in areas such as sales and marketing, HR and technology, as well as on financial matters.
- At the same time, put your professional background to good use. Wear your financial hat and don’t be afraid to look at the organisation through a fresh pair of eyes.
As the nuances of corporate governance evolve, the role of the board, purpose of the organisation and its relationships with the wider stakeholder group are all under the microscope.
- Independence is an important aspect of this role. ‘Independence from management’, is important so as to ensure you’re doing justice to this fiduciary role. You will need to complement and challenge the management team by providing an independent view of the issues that the organisation faces.
- If you believe the board is doing something unethical, or there is a conflict of interest situation, you must be prepared to address it.
- Invest in professional indemnity insurance so that you are covered in the event your company is subject to a joint and several liability legal claim.
- New NEDs may benefit from raising their profile by speaking at industry events, business associations meetings, publishing / contributing to blogs.
Aptly summed-up by the Risk & Compliance journal, ‘the business environment is rapidly changing, and companies that continually innovate, stay ahead of the risk of disruption and take advantage of strategic risk—and the opportunities they can signal—may lead the way.’
As you set out as a NED, remind yourself of the virtues of being bold, deploy your creativity, be prepared to tell the truth and always keep your nerve.
© Anu Maakan 2018
(Disclaimer: all views published here are the personal views of the author and do not represent those of any organisation).