The Non-Executive Director – Dinosaur or Dynamite? - Jo Haigh

Non- Executive Directors have long been used in public companies, indeed the combined code requires for every director you have a non-executive sitting along side them. 

In recent years non-executives have found a place in many medium sized private company boards with numerous forward thinking small and family owned companies realising the value such individuals can add to die hard executive teams. 

The banking crisis has brought many of these individuals into the lime light and certainly not always in a positive way.  

The dinosaur NED’s of old, many of whom it has to be said sat comfortably on their well padded leather chairs through the early part if the 21st century appear now to be dancing around the same board rooms and not in a happy way having for the first time to face the realisation of just how extensive their liabilities are.

The personal liabilities now coming into place have of course always been there but by and large corporate failure at the level now being experienced is a first for many executive directors never mind non-exec’s.

Getting the best out of a non-executive director is the responsibility of the whole board. These people don't come cheap, expect as a minimum in a private company to pay circa £25k per year and in a larger business and PLC’s considerably more.

When business is good such fees are to an extent absorbable. When you are struggling there must inevitably be the temptation to take these costs out or at least re-direct them to more seemingly practical purposes.

If your own NED fits into the dinosaur category chop and cut now, but if such a person has the flair, skills and drive to steer you through the mêlée we now find ourselves in then light their touch paper and let them do their job.

The truly dynamic NED will know only too well what is required and importantly will have the skills and contacts too see things through.

Identifying the dinosaur v the dynamic player may not be immediately clear and apart from the blindingly obvious the following may help;
 

Dynamic

Dinosaur

1

Attends all meetings and contributes

1

Attends some meetings and says very little

2

Ensures board members are made accountable

2

Doesn’t seek to ensure responsibilities are taken

3

Constructively challenges decisions and offers alternatives.

3

 Goes with the flow

4

Understands when it is essential to seek outside support and advice and can recommend suitable people.

4

Doggedly tries to fix problems internally.

5

Negotiates and coaches the board to the best route for the businesses. Even if not their own first instinct.

5

Demands their own way

 

6

Decisive and focussed.

6

Chameleon like and easily distracted.

7

Has a varied bank of contacts across all areas.

7

Limited external contacts in a limited sphere.

8

Understands the legal responsibilities and liabilities of the role and is prepared to share risk and reward. 

8

Driven only by the directors fee being paid.

9

Will go above and beyond the standard remit of the role if required without question.

9

Sticks only to the day job.

10

Can keep the board focused on strategic issues. 

10

Gets too involved in operational matters.

 

So, by no means a definitive list but it’s a starter for 10 and an astute executive using the skills of a NED should always go with their instincts.

Jo Haigh
Head of Corporate Finance for MGR
www.mgr.co.uk
Jo.haigh@mgr.co.uk
0844 826 2851 / 020 7644 9674