The changing role of the non-executive director

Build your own NED

It is still early days since Higgs, Tyson and other relevant reports were
published, but the findings of new Roffey Park research suggest that board
practices may be changing too slowly.

Non-executive directors are increasingly recognised as central to effective
corporate governance, but the role risks stagnation through lack of transparency
in selection and recruitment, lack of role clarity and lack of ongoing
development and evaluation.

Developing a wider pool of talent for potential NEDs should be seen as a
national business priority. A pipeline and formal means of progression into NED
roles should be clarified for people who have other forms of board-level
experience.

Aspiring NEDs should be required to have formal training and be assessed on
how they exercise both scrutiny and other aspects of a non-executive role.

If the talent pool for NEDs is to be broadened, organisations should be
encouraged to enable high-potential managers to take on such roles as part of
their overall development.

A central agency should be formed to act as a ‘clearing house’ for
appointments, screening, training and development. All NED appointments, in
common with public sector appointments, should be openly advertised.

Boards should ensure that their interpersonal dynamics enable appropriate
levels of support, challenge and debate. Cross-sectoral insights can be
increased by ‘swaps’ or secondments. Plc boards, for instance, could invite
junior board members of public sector boards with relevant expertise to be
‘attached’ for a period of time as a form of development.

But at the same time, the onus should be on boards to practice more formal
and rigorous evaluation Beyond compliance with reporting requirements, boards
should approach the evaluation of their practice in the spirit of learning and
improvement.

Indeed, boards should commit to an annual development activity in which they
can more obviously focus on how they operate rather than on the usual business
of the day.

Dr Valerie Garrow is head of research at Roffey Park Institute

Match made in heaven

‘It really suits me at the moment. I get paid £25k a year, tax free, and turn
up for board meetings four times a year. Quite frankly, I don’t really feel I
add any value. I am not sure what the board is really there to do or how we add
value to the business.’

The non-executive director quoted is an old-boys network style NED. This
stereotype is luckily becoming rarer. We recently undertook our own research
looking at the qualities that make for an exceptional NED. Our findings show
that a new and highly engaged person is emerging, as the era of the passive NED
comes to an end.

While NEDs must prepare forthe role and invest in truly understanding the
business, a successful transition requires a two-way process.Interestingly, the
same research highlights the fact that boards are not helping new NEDs get up to
speed.

It is concerning that less than a third of board directors are able to say
whether or not they had helped their own NEDs to prepare for the role. This type
of support helps avoid a situation where the NED says they are not sure how to
add value to the business.

There is no doubt that impartial board audits offer a way forward. However,
many chairmen stillbelieve that conducting a boardaudit is too costly, and that
they can do it themselves.

Boards that do make the investment marvel at the difference in outputs. They
find the nominations and recruitment process far more robust, as the outputs of
a professional audit provide clear guidelines about the strength and the
weaknesses of the board as a whole.

Headhunters who follow best practice insist that this initial audit is
conducted, and find the NED who is going to raise the game of the board and the
business, rather than simply ‘the mouse at the tea party’.

From a recruitment perspective this enables them to fill those gaps
strategically instead of just dipping into the existing gene pool. It also
facilitates alignment on the appointment of new NEDs and encourages them to
review their own personal development with the chairman.

Susan Bloch is partner and head of thought leadership at Whitehead
Mann