There are three types of directors available to organisations – executive directors, non-executive directors, and independent directors. On a good board, each of these types will bring a unique perspective to the table.
What are non-executive company directors?
Non-executive company directors sit on the board of an organisation but are not involved in the company’s day-to-day running. Their job is to bring a fresh, outside and objective perspective to help the organisation grow and thrive while keeping within the law.
The role of the non-executive director (NED) has changed significantly over the past five years. Across the globe, companies have experienced extensive regulatory, technological and financial challenges.
The need for highly-skilled and experienced board directors to navigate businesses through these challenges has never been greater.
Non-executive directors should constructively challenge the board and help develop proposals on strategy and related matters. They should also scrutinise the performance of a company’s management.
What skills do I need to become a non-executive company director?
Good non-executive directors require excellent diplomatic skills.
Spencer Stuart, an executive search company that fills hundreds of board roles each year, says that successful non-executive candidates have industry expertise. For example, a particular competency such as digital transformation is in demand at present.
A modern NED must also have a reassuring modesty. Egotistical and dogmatic people tend not to get hired as non-executive directors.
Highly-valued people that become company directors and board members have a keen ‘emotional intelligence’ – they can quickly grasp other people’s characteristics and agendas.
Good directors are persuasive without being domineering. They need to be able to show respect for executive directors while at the same time being fearless as they have to hold the executive to account.
How much do non-executive directors earn?
Non-executive directors sitting on FTSE 100 boards got paid an average of £70,000 in the UK in 2019. The average remuneration for non-executive directors on an Irish board in 2019 was €63,382.
How much work goes into being a non-executive director?
Non-executive directors should be able to commit the time required for the demands of the job. They must understand their duties and responsibilities. The time involved could be 15 to 25 days a year.
Don’t be fooled; a non-executive director’s role isn’t about turning up to meetings slightly underprepared with a couple of obvious questions. Being a non-exec is hard work and requires a lot of preparation. You need to be on top of your brief at all times but show resilience and independence.
“Arguably the most important characteristic of a non-executive director is their independence and objectivity,” writes David W Duffy, CEO of the Corporate Governance Institute, in his book ‘A Practical Guide for Company Directors’.
“The non-executive director’s role is to challenge the thinking of the chairman and the CEO. Absolute independence will facilitate this.”
Are there many positions available for non-executive directors?
Yes, there is an active and healthy need for non-executive directors in the corporate world.
Under most corporate governance codes, at least half of the board directors in big firms should be non-execs. Smaller businesses should have at least two.
The appointment of a non-exec is typically for an initial three-year term, and they usually serve two or three such terms, although this varies from company to company.
11 tips to help you become a non-executive company director
- Plan ahead. Landing your first non-exec role can be tricky, so it’s essential to use your business network while still working.
- Meet with other non-execs for coffee, pick their brains.
- Talk to the non-execs at your company, ask them how they landed the role and what challenges they face.
- Talk to a recruitment consultant in executive search and ask them to look at your CV and bolster it. Recruiters will know what skills are in demand by boards.
- Your CV needs to state what wisdom and expertise you can bring to the board, and show you have an in-depth knowledge of corporate governance codes and guidelines.
- It would help if you considered gaining a recognised qualification in corporate governance, such as the Diploma in Corporate Governance by the Corporate Governance Institute.
- Look into corporate governance opportunities available at NGOs and charities – they are often the first organisations where seasoned non-executives get their start.
- The chairs of boards tend to look favourably on non-execs with full balance sheet responsibility and good experience of strategic development and M&A activity.
- Chairs may also require someone with deep expertise in a specialist area such as digital transformation, HR or machine learning.
- Your CV needs to outline clearly the key strategic success points of your career.
- Remember, boards must have a balance of skills and knowledge. Non-execs need to have the experience, the authority and the strength of mind to challenge the board and sometimes ask tough questions.
Six habits of highly effective company directors
Non-executive directors are on the board to support the executive team in its leadership of the company and to monitor and control their performance and conduct. To be an effective non-exec you should consider adopting these six working habits:
1: At all times uphold the highest ethical standards of integrity and probity
2: Support executives in their leadership of the business while monitoring their conduct
3: Question intelligently, debate constructively, challenge rigorously, and decide dispassionately
4: Gain the trust and respect of other board members
5: Listen sensitively to the views of others, inside and outside the board.
6: They have a qualification in corporate governance and can promote the highest standards of governance.