BackAs a somewhat crude saying goes, non-executive director (NED) roles are a bit like bidets: no one knows quite what they do, but they add a touch of class.
I landed my first NED role over a decade ago and have been on boards since. For years, I had the growing realisation that I was pretty adept at joining boards but had a niggling feeling that I did not know what I was supposed to do and often questioned my value. I put the feeling down to imposter syndrome. I persevered until I recently attended a one-day course by the Institute of Directors on the role of the non-executive director, led by the brilliant Janhavi Dadarkar.
Landing a NED role is still very much contingent on your network, but there are other paths. I wasn’t born into a ready-made network. Instead, I ventured out into the world and met people and increasingly, in recent years, relied on social media to forge new connections and maintain existing relationships. Being naturally curious led me to meet people in diverse sectors, which opened up new doors and led to NED opportunities. Meeting other NEDs, in particular, is not only useful for learning from their experience, but they also are often in the know when it comes to NED vacancies.
I do not recall politely waiting to be asked. I often made a beeline for organisations I was interested in being a part of. I reached out to members of their board and senior leadership team to enquire about any board vacancies. I followed them on social media and subscribed to company newsletters. Each board position on my CV reflects countless rejections.
It took me a while to figure out that I had to market myself to the board; to identify a skills gap in their existing board composition and offer myself as a solution. It takes emotional intelligence to do this successfully and, in my earlier years, I no doubt came off as rather bolshie. Emotional intelligence and self-awareness are the twin drivers of success when building a portfolio career and navigating the world of NEDs.
Analyse the existing board composition, the organisation’s strategy and values to determine whether there is a genuine opportunity for you to add value. That’s the easy part. The tricky bit is to understand the organisation’s culture – and the board’s microculture – to ascertain whether you would be welcome and a good cultural fit.
I also signed up for Nurole – a hiring platform for non-executive directors. It is free and, once you sign up and configure your interests and skills, you get a weekly email with roles that are best suited to you. Whilst some may miss the human contact of the traditional headhunter, I valued how accessible the platform made the process.
There are many different types of NED, including independent NEDs, senior independent directors (SIDs), who are a check and balance on the chair, investing NEDs, nominee NEDs, alternates, trustees (such as for charities), governors (eg at. schools), chairs and third-sector NEDs.
The reason why organisations have NEDs is to monitor executive activity and shape strategy. The key is to constructively challenge assumptions and facilitate change by being both the trusted counsel and conscience of the organisation. NEDs take a broader view of the operating environment, to balance the short-term view undertaken by the management team, by looking ahead into the future and bringing balance. NEDs can add value through their contacts and leverage their relationships for the benefit of the organisation.
Rules and good practice guides to read include the UK Corporate Governance Code (2018), Wates Corporate Governance Principles for Large Private Companies and ecoDa Corporate Governance Guidance and Principles for Unlisted Companies in Europe. Other areas to research include the sector the organisation is operating in, as sector context matters and best practices differ.
The Companies Act 2006 outlines the director’s duties to promote the success of the company, exercise independent judgement, avoid conflicts of interest, act within powers, not accept any benefits from third parties etc., to keep cognitive bias at bay.
Diversity of the board is critical to avoid group thinking. This should be in terms not only of gender, race and sexuality but also cognitive diversity. This will help an organisation embrace the multitude of perspectives that reflect its diverse stakeholders and create a culture of challenge, albeit with trust.
Governance is Latin for ‘steer’, and therefore as a NED, you should be looking ahead and look out for the grey rhinos as well as the black swans. Walk the tightrope between challenging and trusting the executive team by harnessing emotional intelligence and developing a ‘nose’ for risk. Stay in your lane – strategy – and veer away from operational, as that is the exec team’s domain. However, do a deep dive on the internal controls, systems and processes, if there is a significant risk at play. Whilst the management team are busy with the day-to-day activities, the board adds value by looking ahead and around to identify opportunities as well as threats.
Risk is a key area for NEDs, and they also have to manage their own risks. Ask if the organisation has D&O insurance and, if they do, ask for a copy to ensure you are covered in key risk areas. Know your personal liability. Declare all conflicts of interest – both actual and perceived. Perceptions matter. Taking a measured approach to risk is key to understanding what risks are material and also how to mitigate risks with contingency planning.
When you join the board, you should receive a letter of appointment, a contract, articles of association, if applicable, a board-level document detailing the code of conduct for the board, protocols and succession planning, annual reviews, organisational values and more. You may find yourself joining a board which does not have these documents, and it may be your welcome gift to create them for the next NED to join!
Further good practice for boards is to conduct an annual board evaluation, every third year, by an independent appraiser. The number of board members varies, but the general consensus is to have less than 12 to avoid being a talking shop. Odd numbers can lend themselves to effective decision-making. The board composition should have a majority of NEDs as they are independent and their main drivers are not short-term orientated.
I have an accounting background, so I can navigate through the financials. However, for those who feel uncomfortable with numbers, I encourage you to take a course. There are many tailored courses out there to allow you to understand the financial statements you will be reading as part of your role. You cannot throw your hands up and say you are not a finance person, as you have a responsibility to the organisation as a NED. If you have core expertise then the weight of that area is more so on you than your other board members. But this does not give you the excuse to wriggle out of areas that are beyond your key expertise.
Time commitment is usually four quarterly board meetings a year, which are a day each. You often have to prep a day beforehand, as you will be sent a board pack. So, all in all, it will usually be a commitment of 8-10 days, including an annual review, per annum. If you are a chair or sit on sub-committees, such as finance or remuneration, then there will be a greater time commitment. Some roles are paid, and others are unpaid. For organisations which have a small executive team, you may be expected to be a board member by name but operate as part of the executive team by nature, due to constraints in resourcing. Do manage expectations from the outset with a clear request for time commitment expectations and parameters between NEDs and exec activity.
I wish you all the best and encourage those who are thinking about it to seek out NED positions as developing a portfolio career is increasingly becoming the norm and can be hugely rewarding. For those already in NED positions and who share the niggling feeling that you could optimise your contribution, do look into the Institute of Directors course, as I highly recommend the experience of not only learning the theory but meeting fellow NEDs in the cohort.
