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What is a non-executive director?
Non-executive directors are people who sit on boards to provide an ‘outsider’s’ view of a company’s strategy.
Non-executive directors (NEDs) do not work full-time for the organisation they advise.
Companies hire non-executive directors to provide an alternative opinion or insight that can help with business decisions, company culture and strategy.
Non-executive directors are often called ‘critical friends’ to the CEO and the board, they usually have some professional skills that a board needs such as in the areas of digital transformation, cybersecurity, HR or finance.
What type of person becomes a non-executive director?
There is no one ‘‘silver bullet’’ quality that makes the perfect NED, and there never will be.
Instead, companies and boards will seek a balance of virtues to ensure that they are being advised by an honest mindset, an experienced viewpoint, and a voice that will challenge the norms when necessary.
Below are six qualities of a great non-executive director.
The independent skills of a non-executive director
Remember, non-executive directors are there to provide independent and broad-thinking governance. They are not there to carry out the nitty-gritty of managing a company. So, if you’re in this type of role, and you find your focus drifting towards day-to-day management rather than giving honest opinions about overall direction and strategy, something is wrong.
A great NED avoids routine company-management business, which is one of their strengths. It means they don’t get caught in a maze of decisions and internal supervision, which can sometimes hold other senior employees back from seeing the complete picture.
A good, independent NED can always see the complete picture. They can look down on the maze from above and tell a much clearer story than their closest colleagues.
A good NED will listen, understand, advise and warn … whenever it’s necessary.
Being a non-executive director means striking the perfect balance between being a leader and a critic.
Non-executive directors must be committed
There needs to be a strong level of commitment by the NED towards the organisation they serve, which means alignment with its goals and principles.
That alignment must persist at the foundational level, even if a healthy amount of disagreement and debate arise on a more day-to-day basis.
Feedback, dialogue and challenging the norm can exist alongside an underlying dedication to the company’s mission.
Non-executives must be experienced
A successful NED needs experience in governance to succeed because, pivotally, they are the ones who will be looked to when progress gets tough.
A good NED will know how to navigate significant milestones in a company’s life cycle and be able to offer sound guidance when those moments arise.
They should know budgets and audits, have experience with mergers or acquisitions, and know how to make an organisation adapt to new challenges, whether it’s digitalisation, risk management, cyber security, or anything else.
NEDs need the bravery stick out, to go against the prevailing mood of the board members around them if they feel it’s in the company’s best interests.
The diplomatic approach of non-executive directors
Being a non-executive director means striking the perfect balance between being a leader and a critic.
Independent thinking means occasionally giving opinions that others in the boardroom may not want to hear. But asking those tough questions and dealing out humbling criticism will constantly be required, so a NED must be innovative.
NEDs need the bravery stick out, to go against the prevailing mood of the board members around them if they feel it’s in the company’s best interests. At the same time, they will need to balance this bravery with sensitivity – giving constructive criticism, offering solutions where problems are identified, and ensuring good working relationships with colleagues.
However complex the role of NED gets, diplomacy is essential. If working relationships are damaged, the ability of the NED to bring about change may dwindle.
The respectful approach of non-executive directors
NEDs provide constructive, objective, and honest feedback, but the reverse must hold.
Suppose a person is serious about using their NED role for continuous professional development. In this case, they must be able to accept criticism themselves, do so gracefully, and regularly self-evaluate to ensure that they are fulling the needs they were brought on board to address.
In a sector historically dominated by older male candidates, efforts are now ramping up to ensure more women and younger people from different backgrounds are appointed to NED positions.
The diverse candidate
Diversity on boards is vital. No organisation wants a leadership group that revolves around one outlook. Because of this, and although it’s not a trait in the same way as the others above, it should be noted that boards are continuously seeking more diverse candidates to fill NED positions.
Gender is one issue that has rapidly gained focus in recent years. In a sector historically dominated by older male candidates, efforts are now ramping up to ensure more women are appointed to NED positions.
This effort is also now starting to see government backing. The European Council, for example, has agreed that by 2027, 40% of NED positions in European companies should be held by women. The proposals will now be debated in the European Parliament in 2022.
“Increasing the proportion of women in economic decision-making positions is expected to have positive spill-over effects throughout the economy,” the Council said when the measures were proposed.
“Furthermore, around 60% of new university graduates in the EU are women. Improving the gender balance on company boards would thus also allow many highly qualified women in Europe to realise their full potential.”
