What is a NED?

In this Demystifying series, we shed light on what it is to be a non-executive director. The role of a non-executive director in 2020 is far from the stereotypes; of smoking jackets, whiskey and private members clubs with panelled walls. 

So, what is a NED?

A fresh pair of eyes

A non-executive director brings an external perspective to discussions around the board table. A fresh pair of eyes on the organisation’s performance, trends, strategy, culture, and much more.

Being inquisitive and asking questions is key. As a non-executive director you might highlight a worrying trend in the business performance, or to question whether the company is addressing market trends you’ve seen elsewhere, or to bring your insight from experience you’ve had elsewhere. 

The key here is independence: you are helpful because you are an outsider and you aren’t in the weeds of the company all day. The executives (for example, the chief executive or finance director) are in the business day in day out; as a non-executive director, you are the outside view. 

A skilled person

Companies often bring in NEDs for a specific reason. Imagine an asset management business, facing the challenge of how to launch a direct to consumer platform. Their CEO, FD, and other board members may well not have significant experience in website development. But given the business is starting to spend a significant proportion of its budget in this area, they might want to recruit a non-exec who has experience in technology. 

Boards need a dynamic mix of skills to help them make decision on all aspects of the businesses strategy and operations.

An ear to the ground

The perfect non-executive director would be able to listen to the views and experiences of employees, customers, to the trends in the wider marketing, and the bigger picture opportunities and threats to the business. The reality is you’ll never be able to read every article or meet every person.

You need to consider how you can ensure you know enough to feel you have sufficient independent verification of the things you are discussing in board meetings.  It certainly helps to be an extensive reader and networker, and to read from a breadth of sources, and to meet a breadth of people.

It can be helpful to meet for coffee with those that don’t come to board meetings (the layer below the exec at the board meetings) as they can give you a great insight into trends and culture within the organisation.

A committed board member

A core aspect of the role of the non-exec is to attend and contribute to board meetings. These can be anything from once a quarter to once a month and are likely to be at least two hours, and more often a half or full day. 

Before the meetings, you will be sent through papers for discussion or approval at the meeting. These might come from the executive directors or another specific part of the business – a finance update from the FD or an update on recruitment by HR, for example. You will need to allow time to read and consider the board papers and come ready to discuss them.

Over the course of a year, the board will monitor the success of the company and help the executives make key decisions. This will include reviewing the accounts and P&L for the year, agreeing how much the executive directors should be paid, appointing and work with the company auditors, helping to define and approve the company strategy, reviewing key risks and opportunities, and making sure the company operates within relevant governance, legal and regulatory frameworks.

An accountable director

Responsibility. This is the bit that can put people off. Being a director is a legal position and you and the other directors (exec and non-exec) are collectively responsible and personally liable for the governance, strategy and operational decisions of the company. You have a legal duty to make decisions that you believe promote the success of the company.

When you consider all the various people who are impacted by the business: the employees, investors, customers and wider society, this responsibility should weigh heavily on your shoulders. And that should inspire you to give sufficient time to being a thoughtful, researched and considered member of the board. It should encourage you to challenge poor or unethical practice, to speak up for those whose voice isn’t being spoken of, and to fully consider the impact of the decisions that are being made. 

Being a non-exec is hugely rewarding. It can be a great opportunity to work in a different field or organisation, to learn vital leadership skills and to give back. 

Who can be a non-executive director?

Quick answer is, whoever the board appoints. For a long time there has been a sense that non-executive directors always come to the role after 40+ years of career experience. But things are changing. What boards truly need is a mix: they still need someone with 40 years exec experience but they also need someone with 15 years disruptive tech experience, they need a mix of sector experience, skills, gender, ethnicity, socio-economic background and more. Dynamic Boards is eager to ensure that there is fair and equal access to board roles for everyone. And our hope is that all UK boards will develop a dynamic view of the future mix on their board.

Is it worth it?  

Being a non-executive director could provide you with some of the most exciting, rewarding and varied work there is. It is a significant responsibility, and the decision to accept a role should not be taken lightly.

But the decision to view board vacancies should be taken lightly! Click here to our board roles and explore becoming a non-executive director.





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