Home / Uncategorised

What is a non-executive director?

Could a non-executive director role be the next big step in your career? For many senior executives, becoming a non-executive director — or NED, for short — is the perfect final phase of a successful career, and most see it as the best way to transition into retirement. But what is a non-executive director, and what exactly do they do?

In this guide, we’ll take a closer look at these kinds of roles, and discuss what candidates need to think about before going down the non-executive route. We’ll cover:

What is a non-executive director? How are they different?

A non-executive director is an experienced professional who provides independent strategic advice, guidance, and insight for the executive and senior members on the board of a company. Sometimes also called ‘external directors’, it’s their job to bring impartiality and independent oversight to board meetings.

While a NED does receive remuneration for their services, they aren’t considered employees, and don’t oversee the day-to-day operations or management of the business. To ensure complete impartiality, it’s also important they have not been employed there previously or had any other interests in the business prior to joining the board as a non-executive.

It’s this degree of independence that makes NEDs such a valuable asset to the leadership team. They’re not directly employed by the company in the same way as an executive director, which means they often bring a much needed outside perspective to meetings, discussions, and problem-solving. This impartiality is especially beneficial during internal decision-making processes, such as deciding executive pay for senior company members. By remaining out of the day-to-day goings on of the company, it’s easier for non-executives to see the bigger picture when making important decisions.

Their goal is to offer guidance and insight to the rest of the directorial team, but also to hold the board to account and challenge them when needed. Additionally, depending on the industry, a non-executive director will sometimes act as a networker, helping to build relationships and find new opportunities and contacts. As such, candidates for this role should have extensive skills and expertise relevant to the industry, experience in managing a commercial company at the highest level, and strong interpersonal and communicative skills.

A non-executive director can be appointed across a range of different industries and organisations, including:

  • The private sector
  • The public sector
  • The academic sector
  • The third (voluntary) sector

According to the UK corporate governance code, at least half of a company’s board (excluding the chair) should be comprised of independent non-executive board members. This ratio helps to ensure it’s well-balanced, and that independent viewpoints are well-represented.

What does a NED do?

A NED will be expected to bring their own specialist expertise and insights to the boardroom in order to benefit the company as a whole. The role of a non-executive is to guide and influence the board of directors by sharing your knowledge, experience, and skills, both during and outside of board meetings. At times, that might mean questioning or challenging an executive decision, and ensuring that everyone has considered an issue from every angle before any key decisions or votes go ahead.

What’s the difference between an executive and non-executive director?

The most crucial difference between an executive and non-executive director is that a NED won’t take part in any operational activities or oversee the day-to-day running of the business. Instead, they attend board meetings and provide support and insight to the other executives to help assist with any issues.

In addition to this, a non-executive director might also be tasked with:

  • Creating, planning, and sitting on audit committees.
  • Scrutinising the performance of management and executive directors and holding them to account should their performance fall short of the agreed objectives.
  • Using their existing network of contacts to secure new opportunities and relationships.
  • Looking after budgets and balance sheets.
  • Ensuring that the departmental strategies and plans are successfully followed through.

Working hours and time commitments

A NED will usually have rather different working hours to those of a full-time executive. NEDs will be expected to attend important board meetings and to communicate with the rest of the executive team on a regular basis, but exactly how many hours a month this will entail will vary between positions.

While there’s no set number of working hours, candidates can usually expect to devote at least a few days a month to the role. This time will be spent advising other board members, as well as preparing for and attending board meetings. A NED will be on call more or less all the time and may need to come in for emergency meetings at short notice.

The workload of a NED will also vary. They might work several days non-stop in one month, and then just a few hours the next, but the salary won’t change to reflect this. Many NEDs will hold down several non-executive positions at the same time and may even have a part- or full-time job, too.

NEDs and the law

While the role and day-to day activities of an executive and non-executive director might be rather different, UK law doesn’t distinguish between the two. That means that NEDs will have the same legal duties and responsibilities as any other member of the board, and must behave according to regulations set out in the Companies Act 2006.

This means that a non-executive director needs to be diligent in their duties and always act in the best interests of the company. They’ll be held to the same standards of corporate social responsibility and must take personal liability for their own actions in the role. As such, they will need to show the appropriate level of care and diligence that would be expected of any executive and keep a record of any precautions and actions taken to that end.

Because non-executive directors have the same degree of liability as executive directors, they can be held accountable just like any other member of the board should something go wrong. So, there can be quite a lot of responsibility on their plate, even if the working hours are much less than for a full-time position.

Non-executive director pay: what to expect

The remuneration for a non-executive director depends on the scale and structure of the business in question. According to the Institute of Directors, NEDs at smaller companies can typically expect to earn anywhere from £15,000–£25,000, depending on their experience and the level of involvement expected of them. At SMEs, this figure rises to around £38,000–£40,000, while a non-executive director at a FTSE250 company can receive anything from £40,000–£60,000. Some top-level non-executives at the highest level in FTSE100 companies even reported earnings in excess of £100,000.

In short: non-executive directors’ pay is generous relative to the number of hours actually worked, reflecting the extensive experience and expertise demanded by the job. However, for most NEDs, the salary is merely supplementary to their existing savings or income. Some non-execs will also hold multiple positions, giving them more than one income stream.

For many, the main attraction of taking up a non-executive position is that it’s a good way to gradually scale back from a full-time role to only working a few days a month before retirement, while still receiving an extra income.

How to become a non-executive director


As a member of a company’s board, being a non-executive director means taking on a lot of responsibility, so highly skilled candidates with lots of commercial experience and a proven track record are in high demand. But, as the job usually only involves several days’ work a month, and the remuneration is often very generous relative to the number of hours worked, these roles are highly sought-after and very competitive.

Here, we’ll discuss the sort of skills, experience, and personal attributes that you’ll need to successfully secure a role as a non-executive director.

Relevant skills and qualifications

Most NEDs will have prior experience as a Chief Executive or in an equivalent high-level role and will have the skillset to match. They should be able to solve issues concerning the structure and finances of a business at the highest level, as well as advise on mergers, acquisitions, and policy planning. They will also need to ensure that executive directors and other board members are behaving in a manner which is ethical, responsible, and inline with the best interests of the company. As such, a candidate will need to have a detailed knowledge of corporate best practice.

Other skills which are likely to make you a very attractive candidate include:

  • Auditing experience
  • Ability to carry out budgetary reviews
  • Financial experience, particularly with managing balance sheets
  • Ability to scrutinise the performance of managers and executive board members

When hiring a new NED, a business will usually seek a recommendation from an associated advisory body in their field or use a professional recruitment service.

Experience

The ideal candidate for this role will have substantial experience in the commercial private sector and, in particular, they should have experience managing and creating policy for large or complex organisations. So, if you can prove that you have experience handling acquisitions and mergers, or that you’ve dramatically benefitted a company or organisation in the past, then boards will be much more likely to consider you for the role.

To get some experience, you could also consider working as trustee. Many non-executive directors cut their teeth in the charity sector, and this is a good way to transition from a day job into a more directorial role. Lots of organisations within the public sector — like housing associations and health trusts — are also keen to take on people with related commercial experience, so this can be a great start.

Although the pay for these roles is often less than you’ll receive as a non-executive director at a commercial company and you will usually need to put in more hours, taking this kind of role is a great way to gain some experience, and can be very rewarding in a different way.

Personal qualities

While having the relevant qualifications and expertise is important, it often takes more than this to successfully win the role. A good non-executive director will also need to possess excellent interpersonal skills, and an ability to manage issues with tact and diplomacy. A NED should be prepared to hold the board to account, but without ever being too domineering, so it’s essential that you have the communicative skills to provide constructive criticism in a clear, non-confrontational way

The success of the company will hinge on your ability to work as an effective and entrepreneurial member of the company’s board, so you’ll need to be prepared to work collaboratively and not be egotistical or domineering in your approach.

You’ll spend a lot of your working hours advising and guiding other executive directors, so it’s also essential that you’re willing to be generous with your time. This might also mean being called in to work at short notice.

Being appointed as a NED

Because non-executive directors aren’t technically employees, there isn’t a traditional employment contract. Instead, you’ll be given a template Letter of Appointment upon accepting the position. This will outline:

  • The definition of the time period which you will serve as a NED.
  • An approximate outline for the time commitment required.
  • Details of any board committee posts you will hold.
  • Details of your remuneration package.

We hope that this has given you a better idea of what a non-executive director is, and the experience, skills, and characteristics which are required to succeed in the role. Here at Edward Reed Recruitment, we specialise in finding the best candidates for both executive and non-executive candidates across a broad range of industries. So, whether you’re an experienced professional looking to progress your career with a new job, or a company seeking candidates for a new director position, we can help. And, in the meantime, you can always keep up with the latest news from the world of professional recruitment on our blog.

Think About It!

This one is purely an observation and I wanted to share my thoughts….

Data Protection….please, please, please protect it, or at least give yourself a fighting chance.

This piece is predominantly aimed at those in the market for a new role and are contacting recruiters, job boards and anyone else that smells vaguely familiar!

Today I received the following information from a candidate that I have never met, spoken to, or indeed heard of, let me know your thoughts on the following;

  • Full Name
  • Date of Birth
  • Full UK Address
  • Mobile Telephone No
  • Home Telephone No
  • National Insurance No
  • Membership No (Chartered Institution)
  • Full list of interests & hobbies

I fully appreciate there is often a need for efficiency and in particular the ease for us in an industry to be able to contact people quickly and effectively…however, please give a thought as to how much information you are sharing with people and organisations you do not know.

CS

What are you saying in your pricing?

“Oh, here we go again…a recruiter bleating on about pricing!”…actually forget my profession for a moment and let me know what you think.

Having always worked in service led organisations pricing has always been close to my heart…because if it wasn’t you probably wouldn’t be delivering that service for long!

Whether the service provider is a sole trader, an SME or a plc, perception of value to your clients is critical…and when I say “value” I certainly don’t mean always being the cheapest.

From service led businesses to professional practices there is always a consideration to Competitive Pricing; this is setting the price of a product or service based on what the competition is charging. This pricing method is used more often by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain similar.

One thing I have always been taught is to match your pricing strategy to your value proposition. Your price sends a strong message to your market – it needs to be consistent with the value you’re delivering…back to my industry for a second; this really makes me question whether even seasoned professionals in my sector really think about this, short term wins or long term goals?!

Now I don’t underestimate this, there are several contributory factors which we all must balance; does our pricing;

  • Reflect the value you provide versus your competitors
  • Match what the market will truly pay for your offering
  • Support your brand
  • Enable you to reach your revenue and market share goals
  • Maximise your profits

Are these factors that we all take in consideration when pricing for work in whatever sector or market we operate in…what priority should they take?

CBI looks to the future with North East entrepreneur

An enterprising business leader from Newcastle has been invited to join a prestigious newly formed committee designed to give a stronger voice to a new generation of business leaders.

Chris Stappard, managing director at Edward Reed Recruitment has been appointed to the CBI’s 35 under 35 committee. Brand new for 2016, the committee has been designed to bring together current and future leaders from a cross-section of industries across the UK, to help create a more diverse representation of business and provide a platform for future leaders. Chris explained:

“In the aftermath of the EU Referendum earlier this year, the CBI recognised that there was a huge difference in opinion between the older and younger generations, and realised that the perspectives of today’s young professionals were not necessarily being represented within the organisation.

“The CBI wanted to tap into this resource, to understand the impact that national economic issues have on businesses from a fresh perspective, and so, the 35 under 35 committee was founded; to give a voice to a new generation of business people who are better connected with the views of young people within society.”

 

Going forward, the 35 under 35 committee will be included in the consultation process for all of the CBI’s parliamentary affairs, and will be invited to comment on the effects that national political, social and economic issues have on regional businesses.

Chris received the invitation from the CBI to apply to the committee in early August, and found out just a few weeks later that his application had been successful.

Chris will attend quarterly meetings over the course of his two-year term on the committee, where he will be sitting alongside senior representatives from large PLC’s and blue chip organisations from across the UK.

“It’s a great honour to be a part of the 35 under 35 committee,” Chris said.

“To have been invited to represent not only Edward Reed, but the region’s recruitment industry as a whole on a national scale is a real privilege. It’s a fantastic opportunity to really contribute and make a difference to business policy, but at the same time, it’s also a great opportunity to raise the profile of Edward Reed.”

Regional head of CBI, Sarah Glendinning said:

“Chris’ work with Edward Reed as well as his membership of the CBI ensures he is in regular contact with business leaders across the region, making him an ideal candidate for the 35 under 35 committee as well as providing him with a platform to represent the views of our latest generation of business leaders.”

Founded in 2015, Edward Reed is an independent recruitment firm which specialises in mid to senior level management recruitment across the finance, HR, operations, sales and marketing and IT sectors.

The firm prides itself on its personal, flexible approach to recruitment, where staff take the time to understand candidates’ needs in order to make perfect placements.

Recruitment and the KPI Culture

The bad old days of recruitment still exist in some agency offices across the UK. Quantity rules and quality is at best an afterthought.

Traditionally, recruitment consultancy staff were ruled and governed by KPI data, measuring number of sales calls per day, client visits per week, how many new candidates had been registered onto the database and how many candidate CVs had been ‘spec’d out’ often unsolicited to unsuspecting client hiring managers.

Consultancy not sales…

For most of us, things have moved on.

Rather than working in a boiler room environment, we spend our time focussing on quality relationships with candidates as well as clients, understanding individual drivers, cultural fit and how we may best support a recruitment process.

KPI information naturally has a place in any business that relies on fee earnings in order to generate revenue but a true recruitment consultancy looks beyond basic information such as call ratios and database growth and carefully considers individual business relationships, candidate engagement and long term opportunities.

It isn’t rocket science….this is a relationship and consultancy led industry. Get the basics right and KPIs are no longer necessary.

Recruiter or robot?

Meeting a hiring manager to discuss a role can often feel like an exercise in ticking boxes before going away and writing up a bland job description, lacking any flair or excitement. How often do recruiters simply go through the motions when taking a brief:

  • Reason for vacancy
  • Reporting lines
  • Key skills and qualifications
  • Salary & package

….and so on…

Getting under the skin

The real fun in recruiting for a client is when we have the chance to really get under the skin of a business, understand the culture of a department or an organisation, get to know the key players and really have some interesting insights to give candidates when canvassing them for certain roles.

This is the time to ask questions that go beyond the usual bland everyday things we would expect to ask. As recruiters, we have an obligation to challenge the hiring manager, getting them to really provide an insight into the role and the sort of person they are looking for.

Time to start asking challenging questions, such as:

  • Let’s take skills and relevant experience for granted….what are the personal traits someone needs in order to fit in to this organisation?
  • What is the biggest obstacle to succeeding in this role and has anyone come up short in the past…if so why?
  • What will the interview process involve and are you confident it will be broad and detailed enough to really assess each candidate fully prior to appointment?
  • What hiring pitfalls or mistakes have you made as a business in the past for similar roles?

My experience tells me that clients enjoy being challenged and asked to really look in detail at the hiring process, the wider candidate profile and their organisational set up in order to make the recruitment process as effective as possible.

A rushed process often means a poor hire, an unsettled candidate and a role that can quickly become vacant again.

What defines a dream job?

How would you define the dream job?

Perhaps it’s a job you still want to do, even if your numbers came up on the lottery!

For others it is the chance to turn your hobby into a career that provides a good standard of living

Perhaps it is simply having a job that truly utilises all your skills and offers you the challenge you crave

Or is it simply a case of working in the right cultural environment, with the right team and the hours that suit your lifestyle?

Think about it…do you have the job of your dreams?