“The ideal NED today is the corporate equivalent of Superman: they possess wisdom but remain plugged into current developments; they need a breadth of experience alongside a depth of knowledge; they need a variety of complicated and niche skill sets but also sophisticated communication skills. They also need to have the time and passion for business to commit to the increasing range of responsibilities.” - Korn/Ferry Institute
The role of the Non-Executive Director is distinct and unique, requiring flexibility, accountability and innovation that supports and challenges strategy in the boardroom. As highlighted in our previous article, ‘What is a Non-Executive Director?”, although there is no legal distinction between an executive and non-executive director, non-executives are operationally separate from the management team, bringing independent and objective oversight.
The role of the non-executive director is deliberately broad. It is imperative that non-executives remain independent in thought and practice in order to provide the constructive challenge required by hiring companies. Although distinctly separate to management, it is also crucial that non-execs conduct their responsibilities with those who have an interest in the company in mind; this could range from stakeholders to internal employees, and the broader civil society.
The role of a non-executive director is commonly seen as a natural progression for executives to contribute their knowledge and experience of an accomplished year to a portfolio of clients. Furthermore, the Non-Executive Director role is continually-evolving, and there is increased demand for non-executives to be able to advise from ‘a strategic vantage point,’ at the same time understanding in operational detail to do so more effectively.
In essence, the non-executive director’s role is to bring creative, independent perspective and effective challenge in the boardroom.
Why do companies hire non-executive directors?
The growth of the non-executive market demonstrates a significant demand and trend of companies hiring external professionals to bring an independent, informed and fresh perspective to company strategy and operations. They are seen as the ‘trusted advisor’ to senior staff, maintaining an objective and independent perspective.
The best non-executive directors are selected owing to their breadth of experience, suitable calibre and personal qualities.
However, as highlighted, today’s non-executive directors are expected to play a twofold role as a provider of both a breadth and depth of knowledge. The former will stem from an accomplished executive career with years of insight and experience, typically within a specific industry, in order to advise from that strategic vantage point. The latter encompasses a range of more acute specialist knowledge, such as transferable financial knowledge, marketing insights and talent retention, valuable insights, or even key contacts in related industries.
Being informed across all levels of the company, non-executive directors are more effective in seeing the ‘blind spots’ that directors frequently miss. An important aspect of the role of the non-executive director is being more informed on, and hence, more committed to representing employee insights in boardroom strategy, possessing a wider array of operational knowledge than their executive counterparts.
Moreover, non-executive directors take responsibility as the custodians of corporate governance. Their independence in order to achieve this is critical, and their role should put monitoring executive management at the forefront of their agenda.
In addition, companies are attracted to non-executive directors for their mentoring role to senior management, whenever critical and challenging issues arise. Non-executive directors are better-placed to weather these storms owing to their rich experience and objectivity, where their external analysis is likely to be more honest and independent than someone internal to the business.
What do companies actually expect from a Non-Executive Director?
The input from non-executive directors will fluctuate depending on the client’s business structure and particular needs. However, by in large, companies will hire non-executive directors for a mixture of the following strategic elements:
First, non-executive directors should critically evaluate management performance in terms of objectives, progress indicators and reporting. Second, non-execs are expected to effectively respond to and mitigate risk, which necessitates a high degree of financial insight and confidently analysing systems and reports. Third, non-executive directors are responsible for strategic advising in the management of people. This may include fitting remuneration, overseeing leadership transition and succession planning. Finally, and most importantly, the role of the non-executive director is focused on constructively challenging and contributing to the overall strategy of the client. Their independence - the unique distinction between themselves and their executive counterparts - is critical to effectively carry out their role in their portfolio career.
In order to fulfil their role, the Non-Executive Director will be expected to meet at least once annually, sometimes as a group without executive directors. Moreover, non-execs should be encouraged to seek additional independent advice, and training where necessary, in order to pave specific knowledge gaps to delivery to the highest standard.