NEDonBoard
Written in consultation with the NED Community, launched June 2017
- What to Expect of the NED Role
About NEDonBoard:
NEDonBoard is the Professional Body for non-executive directors and board members in the UK. NEDonBoard is a member-centric organisation. We inform and inspire the non-executive director and board member community and uphold the highest standards of professionalism, governance, and ethics. NEDonBoard enables effective boards.
NEDonBoard’s Mission Articulates Around Three Pillars:
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'What to Expect of the NED Role'
As well as being able to download What to Expect of the NED Role, the June 6th launch event speeches and Q&As are available to watch in the video below. NEDonBoard was delighted to be joined by the guide's primary authors, Charlotte Morgan and Jos Creese, as well as key contributor Mark Cardale that evening, and many of the non-executive directors who contributed their experiences to the guide.
With special thanks to the following NEDs, board members and board experts for their consultation and review in the development of What to Expect of the NED Role:
Charlotte Morgan
Jos Creese
Mark Cardale
Bryan Foss
Caroline Evans
Clara Durodie
Dr. Helen Glenister
Helen Pitcher OBE
Krystyna Nowak
Maria Chanmugam
Mark Curtis
Oonagh Harper
Dr. Sarah Blackburn
and Steven Reed
Why Should You Consider Becoming a NED?
Typically, a NED will offer broad experience in fields relevant to the activities of the organisation to which they are appointed. For many NEDs, this is an opportunity to apply their existing experience in a wider context. But it often calls for the development of new skills, as well as using existing skills in new ways.
Being a NED is not an easy option. It carries onerous legal responsibilities and may require the NED to think about, discuss and make decisions on a wide range of issues, possibly across a number of different disciplines.
- The Company’s Perspective: Why Appoint a NED?
The main reasons for appointing a NED are to bring independent perspective and objectivity to the board.
External experience in the sector, or with customers or regulators, is particularly valuable as it should improve the understanding and management of the risks in the sector and help support business growth. NEDs can also bring diversity of skills and interests to the board whereas the experience of the executives may be homogeneous.
What Else Does the Guide Cover?
The Commonalities and the Differences
NED roles vary greatly due to factors such as
• The sector – There are many different sectors - not just the public and private sectors, and different business sectors, but also charities, academic institutions and professional bodies, all of which have different cultures, regulations and functions.
• The type of business – A family-run business or a partnership, compared with a large corporate for example, will probably require a very different style of NED.
• Other factors – Such as the balance of the number of NEDs and executives on the board. Some boards have a NED majority; some may have just one NED brought in for a specific role.
There are a variety of secondary characteristics which also impact on NED roles, such as:
• The nature of business challenge – An organisation may be going through a merger or acquisition, or may be operating in difficult times, perhaps with strong competition, market change and pressure from shareholders or financial backers.
• The scale of the business – A small business or ‘start-up’ will need a different skill set, which may be more intense or specific than is expected of a NED in a large and well-established, mature organisation.
• The balance between UK based and international activities can make a difference as well, especially in organisations seeking a NED who understands the changes in international relationships post Brexit.
Types of Organisation
1The Private Sector
Many people looking for a NED role will think first of the private sector, because that is a world with which many in this position feel some familiarity and also because NED roles in the private sector are more likely to be remunerated (or perhaps better remunerated) than elsewhere.
2The Public Sector
The public sector is very varied, with NED roles found today in every area – councils, government departments, non-departmental public bodies (NDPBs), schools, colleges, universities, police and re services.
3Academic Sector
Universities, colleges, schools of all types (public, private and state sectors) and associated research bodies, often appoint NEDs. Sometimes they are called governors, sometimes trustees, but they are all in effect NEDs.
4Third Sector
The Charity or “Third sector” is diverse and complex. According to Charity Commission data, there are 167,109 (as at December 2016) registered charities in the UK.
Factors You Should Consider
Before Accepting a Role
Applying for a NED role, being asked to attend a NED interview, or indeed being offered a position, is exciting and flattering – there is often stiff competition and you will be selected because of your reputation or experience. But you should be careful before accepting a position and consider the following points in particular:
Your level of interest and commitment to the organisation and to the role - Most appointments require review and re-election after three years but there may be an expectation that the NED will complete at least two three-year terms, or even three.
Personal risk - It’s important to assess the risks and whether you have the requisite sector and governance skills to shoulder responsibility for them.
What resources does the organisation offer? - Do they offer formal induction and training both before starting, and ongoing? Can they support you with appropriate professional advice, including legal advice if there are legal or regulatory challenges? While a major PLC will take this for granted, it may be more difficult for a start-up to resource this.
Time commitment, travelling requirement, fees, and expenses all need to be fully understood - It’s a good idea to ask existing NEDs about the time commitment if you can, as well as asking the company themselves.
Contract for services - There are sample NED letters of appointment online, or you may prefer to take your own legal advice. Bodies such as the Institute of Directors (IoD) and ICSA also have pro-formas. However, there may be little room for negotiation as the organisation is unlikely to want different contracts for different NEDs.
The implications of the legal and regulatory status of the organisation - For example, directors of banks and insurance companies have additional responsibilities to the regulators, and some potentially onerous personal liabilities under the Senior Managers Regime.
In summary
Carry out your own personal due diligence about the role, especially in the following areas:
- Business & sector – Strategic future, competitors, regulation, profitability
- The Chair and other NEDs – Their integrity, resilience, openness, likeability
- The executive directors – Integrity, understanding of the business, future commitment
- Legal and regulatory status
- Terms and conditions and protection available to you - Including D&O cover
The Guide Also Covers
Special Roles a NED May Hold
The Basic Principles NEDs Should Apply
General Guidance for NEDs
How to Conduct Yourself as a NED
Appendix – Useful Further Reading
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