Diversity in Choosing a NED
William Harriss
Entrepeneur, Inventor and Innovationist, Journalist, Writer, Author, Professional Company Director, Small Resort Owner, Hotel Hygiene and Sterilization Specialist.
By William H Harriss. 8/21/2023. [email protected]
?
A Non-Executive Director (NED) is a member of a company’s board of directors who is not part of the executive management team. They are not involved in the day-to-day running of the company and instead provide independent oversight and strategic advice to the executive team.
Non-executive directors [NEDs] should bring to the board an outside insight that the executive directors lack due to closeness to the company which may blur their vision of what’s happening right under their nose. Like with any close-knit family outsiders can have a different vision of what is going on within the family circle than the family members have.
NEDs should be visionary like and be able to see things that the corporation’s management is unable or unwilling to see, bringing a distinct diversity, what some call thinking outside of the box. Without vision, a NED acts more as a manager, transactionally this makes the NEDs of little use to help the companies progress. The NED should set the tone for the rest of the board, opening their visions, and thought channels and encouraging them to consider more aspects of the operations and to work more actively toward achievements and goals.
Non-executive directors bring a unique set of skills to the board table, with an emphasis on strategic advice and oversight. Some of the key responsibilities of NEDs include providing strategic guidance to the executive team, monitoring the performance of the executive team and the company as a whole, representing the interests of shareholders, providing oversight on key business decisions, assessing and assisting with risk management and compliance, ensuring that the company adheres to good corporate governance practices, offering a fresh perspective and independent thinking on key business decisions, overseeing the performance of the management team and holding them accountable for the company’s performance, acting as a liaison between the board and other stakeholders such as shareholders and employees, monitoring the company’s compliance with laws and regulations, providing independent judgement and challenging the executive team when necessary.
Most corporations selecting non-executive directors generally seek those that have a broad range of experience and expertise to effectively fulfill their responsibilities. Some of the key areas of expertise that are often sought after in NEDs include industry expertise, leadership and management experience, financial acumen, legal and regulatory knowledge, business acumen, board experience, excellent communication, and interpersonal skills. They should also have different skills to increase the “human wealth” of the company. A non-executive director may be representing a major shareholder, but an independent director will generally have no other links with the company other than sitting on the board, observing, and advising the board and the absent shareholder. One of the most important non-executive directors’ principal roles is to provide independent judgement and perhaps a little spice to the board, which they sometimes lack.
When selecting a NED, it should be on a basis of a different and diverse type of character to the existing board, otherwise you end up with just another same of same clone as the rest of the board. They should also be likeable otherwise the board will have difficulty excepting them. For obvious reasons care should also be taken to ensure that the NEDs selected are not friend or family of any of the executive board members.
领英推荐
An interesting modern theory is that sometimes some of the best NED input to a board may come from NEDs who are not experts in the corporation’s normal field of trading or operation; this, once again, can give a different perspective to the insight they bring to the table. They will ask more questions and study more about the operation than someone who claims to know it all. It may well be worth a try to see how that works out for a year.
How about appointing a NED who is an entrepreneur? They have an amazing vision of how things should be and are able to see opportunities that most corporate people just cannot see or think of. Could this be a way of livening up your board and setting your corporation on fire in the most unexplored and simplistic way.
The number of NEDs on a board can vary depending on the size, complexity, and industry of the organization. Generally, it is recommended that a board should have at least two NEDs to provide an independent perspective and balance the power of executive directors. Four NEDs to every ten executive board members, or two to five.
?
Comments invited, please make some input into the subject. You may stay anonymous if you so wish.
?
Thank you for your time.
William