"THE CONTEMPORARY NON-EXECUTIVE DIRECTOR" -
GRAHAM DURGAN, EWI & NEDA CHAIRMAN
“The appointment to a board as a non-executive is not a badge of honour or reward for past endeavour. It is an important role contributing considerable value and carrying great responsibility.
Today, non-executives are a vital component of good governance and management challenge. They are needed now more than ever – at a time where the ethics and conduct of a few bad apples, on occasion, spoil the public’s view of the whole barrel” (Sir Roger Carr, BAE Systems Chairman – Non-Executive Directors’ Handbook 4th Edition)
The words above come from the ‘Foreword’ penned by Sir Roger Carr (past Chairman of the Non-Executive Director Awards) for the Non-Executive Directors’ Handbook (4th Edition published by the Non-Executive Directors’ Association (‘NEDA’), March 2016) and provide an excellent backdrop to the essential role of a Non-Executive Director (‘NED’). There is an expectation that boards are populated with experienced individuals and members come to the boardroom table with a range of skills and capabilities. However, the world does not stand still and so board members need to ensure that they can keep up to date and keep abreast of both current and future developments.
The corporate landscape is changing and boards need to reflect the demands of the modern world, in particular some of the critical areas that need proactive input include:
Business Strategy… what are the tools and techniques that our board members need?
Corporate Governance… how do we develop and nurture the right corporate culture?
Risk Management… how do we deal with the range of risks we have to cope with?
Board Performance… do we need to measure it and what does best practice look like?
Stakeholder Communication… what are the expectations of our key stakeholders?
The ‘Contemporary NED’ needs to help their organisation navigate and develop a coherent response to these aspects. The NED role itself has an element of a ‘Life-cycle’, as defined and promoted by NEDA, which considers four stages of NED development:
Stages 1. and 4. have in the past been overlooked especially as aspirant NEDs can often dive into the first role on offer without appropriate ‘due diligence’ and without taking into account a longer-term view of their personal objectives. NEDs should take the opportunity to undertake their own ‘skills audit’ and ensure that they plug any gaps and gain a broader range of experience. An example of a new area of expertise is digital skills and knowledge – knowing how to use technology to transform business, which is something that all board members need to some degree but often do not have unless they have been brought up in the new digital world.
Consequently, the Contemporary NED often favours a more diverse candidate which takes into account areas such as experience/skills, age, ethnicity and geography, as well as gender (gender is not automatically the first reference point). The NED role has for some time been seen as the next logical step for ‘retired business professionals’, but such individuals can get out of date very quickly. Leading corporates are now sponsoring their rising stars as part of Talent Programmes to go outside of the organisation to gain NED experience alongside their executive role. This can have benefit for all three parties (corporate sponsor, aspirant NED and receiving organisation), but the NED must be able to balance potential competing and conflicting demands on their time.
Other trends taken on board by Contemporary NEDs include flexibility in how they might be mentored – given the new emphasis on digital and other skills noted above it may be beneficial to have a system of ‘reverse mentoring’ where younger executives mentor the older members of the board, as they will have a better understanding and appreciation of the new digital economy and related business models. The new focus of promoting ‘apprenticeships’ in business could also logically include the professional development of talented executives helping them better understand their transition to being an effective non-executive director.
Finally, NEDs are appointed because they bring a wealth of experience to the board and to the organisation, but once in post there is typically no mechanism in place to track and review their Continuing Professional Development (‘CPD’). As part of a Board Performance Evaluation there should be a check on the board members’ on-going training and education plans, but this is often overlooked. The Contemporary NED will have this area under control and will link this to evidence of the successful achievement of their personal objectives.
The role of the NED continues to evolve but there are a number of areas noted above where organisations can look, learn and benchmark against leading practice. However, in our experience the bottom line is that all boards need to operate as well drilled teams, work collegiately and make the right decisions, so ….“the best way to improve the team is to improve yourself”… you therefore need to assess your ability to add value and to operate as a Contemporary NED, as part of a more diverse board.
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