How non-executives can help business grow
23rd March, 2016
FAST-growing businesses looking for further ways to develop may well want to consider bringing on board a Non-Executive Director (NED), essentially an independent director who provides guidance and challenge to the management of a company.
The past decade has seen a huge growth in “portfolio careers”, with individuals forming part of a small number of boards in their ‘portfolio’, essentially having more than one job on a part consultancy basis. Many of our clients with businesses at various stages of growth see great value in the advice and guidance offered by NEDs.
In the UK, NEDs sit on the boards of thousands of private, public and not for profit organisations, often developing a company’s performance whilst offering strategic input. However, there are a number of important considerations that companies and NEDs alike should address before agreeing to work together.
Strategically, companies will want:
- someone with experience of operating in business at a senior level, who can give the board the benefit of that experience and targeted advice on matters such as formulating and implementing strategy and raising new capital
- someone with relevant connections, who knows people or businesses that that company wants to reach out to and who can open those doors
- someone with the right personality to be able to work with the board of directors and to fit in with the culture of the business – someone who can challenge the directors in a constructive and proactive way without overwhelming the rest of the board or taking charge of the business
Both the company and the NED should have clear expectations of the scope and nature of a NED’s appointment, including the time commitment required from the NED, before the working relationship starts.
A NED’s role should be to provide high level quality guidance to the board and as such, a NED should not be expected to spend significant time in the business (a day a month attending board meetings and any additional day for preparation is typical).
The NED should also match the time he or she spends with a company with the changing needs of the business.
For example, where a company is engaged in a large project or transaction it is likely that the board would benefit from a greater presence from the NED, after which the NED can reduce time spent with the business accordingly.
From the NED perspective, they need to understand that as a statutory director they have legal duties and responsibilities to the company, much like the executive board itself. This is so regardless of the level of involvement or decision-making power that NEDs have in respect of the business.
To be seen to add value, NEDs need to ensure that they are up to speed with the objectives and obligations of the relevant business, including changes to legislation and relevant regulatory requirements of the business in the relevant market place.
At Ward Hadaway, we offer this kind of support and information to NEDs to help keep them well briefed on important developments affecting the business they are involved in as well as ensuring they fulfil their legal duties and responsibilities to the company.
We find this kind of service can really help NEDs as they look to make a real difference to companies and help create further growth.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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