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ClearThe Value of Non-Executive Directors
A board of directors faces a complex and demanding set of responsibilities and challenges. These pressures can also seem contradictory.
The Institute of Directors (IOD) publication “Standards for the Board” states that the board:
- must simultaneously be entrepreneurial and drive the business forward while keeping it under prudent control.
- is required to be sufficiently knowledgeable about the workings of the company to be answerable for its actions, yet able to stand back from the day-to-day management of the company and retain an objective, long-term view.
- must be sensitive to the pressures of short-term issues and yet be informed about the broader, long-term trends.
- must be knowledgeable about “local” issues and yet be aware of potential or actual non-local, increasingly international, competitive and other influences.
- is expected to be focused upon the commercial needs of its business while acting responsibly towards its employees, business partners and society as a whole.
The inclusion of the right Non-Executive Directors (NEDs) on a board can greatly assist an organisation to successfully achieve this balancing act.
The continuing spotlight on Corporate Governance has tended to emphasise the NED's responsibilities regarding the checks and balances side of governance but this is not their only role. They also have an important part to play in helping to shape policy and ensuring the long-term viability of the organisation.
Small companies may often believe that they cannot afford a non-executive director but the converse is the truth. They cannot afford not to have one, provided the NED brings the right skills and experience. Adding an experienced and independent voice to the board can mean the difference between successful or abortive expansion.
Larger companies normally already have non-executive directors but many of these will have served for a large number of years. The Higgs report recommends “A non-executive director should normally be expected to serve two three-year terms, although a longer term will exceptionally be appropriate.” This means that non-executive directors should be retiring by rotation and new candidates will need to be sought.
A non-executive director should add value to the business. They should be someone who will help with decisions about strategy and resources not someone who will slow down progress.
The problem is to find the right “fit” for both the organisation and the individual. A good NED will be strong in four roles:
- Supportive: being a good listener and mentor, providing encouragement, calm wisdom and motivation, while being the "critical friend".
- Creative: providing fresh ideas, a different perspective and lateral thinking.
- Political: being a diplomat in times of conflict and bringing balance to discussions.
- Overseeing: probing and monitoring to ensure good governance.
A fit is also needed in terms of complementary skills, experience and personality. In addition many boards would like their NEDs to bring a network of contacts within a particular market.
To solve this dilemma the OSA Group has recently launched their Non-Executive Register, a service which enables organisations to source suitable non-executive directors.
OSA is perfectly placed to assist in the appointment of non-executive directors, and to provide advice regarding the potential talent pool, in a confidential and professional manner, and to enable prospective non-executive directors to register their interest. Following both the Institute of Directors guidelines and our own internal guidelines we work closely with our client companies to identify the needs of their board and provide an expert analysis of available professionals.
Howard Callow, Chairman of the Isle of Man branch of the IOD, said “We welcome and endorse this initiative by OSA. It is so important to the success of a company to have the right board members but identifying suitable candidates can be extremely difficult and time consuming. The IOD is committed to ensuring that non-executive directors are of suitable calibre and fully understand their responsibilities so we are pleased that OSA will be following the IOD guidelines.”
The OSA office in Guernsey will be offering a similar service so if there are no suitable candidates on the Isle of Man register it will be possible to search the Guernsey register as well.
Whether you are a company looking for non-executive directors or an individual with the desire and suitable qualifications to fill the role of a non-executive director, please contact Bernadette Murphy, Director, at OSA on +44 (0)1624 611161 or berniemurphy@osa.im for further details of this service.
Alternatively, please complete the downloadable registration form below and send to Bernadette Murphy, Director, OSA Ltd 13 Church Street, Douglas, IM1 2AG.
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