Whether you are CEO in an SME, in senior leadership in a FTSE or Fortune 500 listed company or looking to reinvigorate a stalling mid-career lull, expanding your portfolio with non-executive director positions will repay your years of personal investment of time and energy with dividends.
Here we look at the responsibilities, benefits and pathways to becoming a Non-executive director (NED).
Non-executive directors (NEDs) play a pivotal role in corporate governance, offering an external and independent perspective to the organisation. Unlike executive directors, NEDs do not hold a position within the organisation they serve, ensuring that their insights are impartial and objective. Their primary purpose is to contribute to the strategic oversight and governance of the company.
NEDs can bring a wealth of specialist skills and experiences to the table, such as academic expertise or a focus on technical, EDI (Equality, Diversity, and Inclusion), or sustainability matters. They often participate in sub-committees, such as the Risk Committee, Remuneration Committee, or EDI Committee, where their specialised knowledge can be applied effectively.
Meanwhile, their independence can give them the distance, perspective and overview to ask the hard questions and inject fresh and novel thinking. Their role is not confined to day-to-day operations, allowing them to focus on the broader strategic issues that impact the company’s success and sustainability.
Existing board members are tasked with identifying knowledge gaps within the boardroom and appointing NEDs who complement the existing team, not only in terms of practical attributes but also aligning with the company’s values and culture. This approach ensures a well-rounded and diverse board that can address a broad spectrum of challenges.
In recent years, there has been a growing emphasis on the role of NEDs in fostering diversity within corporate boards. Boards are increasingly turning to NEDs to bring a variety of perspectives, including those of women, individuals from ethnic minority backgrounds, and those with disabilities. The UK Corporate Governance Code underscores the importance of NEDs, mandating that they should constitute at least half of the board, reinforcing the commitment to independence and diverse representation at the highest levels of corporate leadership.
Traditionally, NEDs would be expected to have some decades of experience behind them. However, the need for specific skills in fast-changing business environments means boards are welcoming much younger candidates with niche experience, though knowledge of the essentials, compliance, governance, technology trends etc, or at the very least a willingness to become proficient in them, are still a prerequisite.
EXTEND YOUR PROFESSIONAL NETWORK:
Board positions often offer extensive networking opportunities. NEDs connect with fellow board members, executives and stakeholders, creating opportunities for future personal and professional growth.
BUILD A PLATFORM TO LEVERAGE FOR A FUTURE EXECUTIVE BOARD POSITION:
NED roles offer a platform to showcase your governance, strategic, and advisory skills, making you a strong candidate for future executive board positions within your current organisation or in other ventures.
BUILD YOUR CV AND DIGITAL BRANDING:
Board positions enhance your CV, showcasing your experience in governance, strategy, and risk management. Ensure that your board roles are prominently displayed on your LinkedIn profile, contributing to a robust digital presence.
RESET, REVITALISE AND RE-PIVOT DURING A CAREER BREAK:
NED roles typically do not involve day-to-day operational responsibilities, providing individuals with a degree of flexibility in managing their time and commitments, whilst staying professionally active, gaining new insights, and remaining engaged in the business community.
HAVE A LASTING IMPACT ON A BUSINESS OR COMMUNITY ORGANISATION:
NEDs play a crucial role in shaping the direction and success of organisations. Contributing to positive change and sustainable practices can provide a sense of fulfilment and a lasting impact on the business or community.
DEVELOP BROADER INSIGHT INTO ORGANISATIONAL MANAGEMENT:
For those executives looking at new career pathways, becoming a NED offers a way to broaden strategic and executive insights on how different organisations are run. In addition, for those considering retirement, it’s a way to stay engaged in the business world, share accumulated expertise, and continue making meaningful contributions without the full-time executive workload.
FUNDAMENTALS OF GOOD MANAGEMENT FOR SMES:
If you are self-employed or run your own SME, a NED position offers insights into the fundamentals of good management. Learning from board-level experiences can help you apply strategic principles to grow and manage your own organisation more effectively.
Compensation tends to reflect the size of the company and the expectations of the role. Latest figures show basic NED pay at the UK’s largest FTSE 100 companies ranged between £70,000 and £94,000 in 2023 though additional responsibilities such as chairing sub-committees will attract further remuneration. According to executive-search firm Spencer Stuart, salaries can reach £1.5 million a year for the highest-paid non-executive chairman. Most roles within the charity or not-for-profit sector are unpaid.
START SMALL:
If you are looking for a first directorship, consider your motivation for seeking a directorship, what you hope to achieve and what you bring to the table.
You may first wish to gain some experience with a local charity, as a school governor or on the board of an associate’s start-up.
This initial involvement provides valuable insights, helps you learn the language and etiquette of board membership, and provides the first rung on the ladder.
BUILD YOUR BRAND:
While considering your next move, it’s important to understand and develop your board value, specific to your target sector. Make yourself visible in relevant circles by participating in webinars and online events. This not only allows you to connect with key individuals but also provides an opportunity to learn about specific industry nuances and general business trends.
SHOWCASE YOUR EXPERTISE:
You need to demonstrate skills in independent thought leadership and understanding of risk, compliance and the trends and developments within that market. Seek executive career advice to identify your own unique skill sets and experience against key current market trends. Clearly articulate how your expertise can contribute to a board’s strategic discussions and decision-making.
IDENTIFY APPROPRIATE POSITIONS:
Spend time reflecting on your career path; are you looking for stepping stones or a single, rewarding position? Do you want to have an immediate impact in a smaller organisation or sit back and learn from a bigger, established one? Clearly define what you can offer to a particular organisation and where you see yourself fitting in.
RESEARCH THE BOARD AND LEADERSHIP:
Who are the influencers? How can you reach them? What can you offer them? Explore their membership of digital communities, look for shared areas of interest through which to connect. Reach out to them through email or LinkedIn and clearly communicate your value, why you are interested in their particular organisation and how your skills align with their needs.
BOARD MEMBERSHIP IS A SERIOUS BUSINESS…
NEDs are as legally liable as executive directors if anything goes wrong. Taking a share of the responsibility for an organisation of any size is a big undertaking that requires commitment, hard work, ethical judgement and continuous learning. Decisions made in a boardroom can have a tremendous impact – for good or for bad – on the lives of many people. Consider whether you have the resources and bandwidth to fulfil and do the position justice before actively engaging with the market.
If you’re seeking guidance in this journey, the Rialto executive career advice service is available to help shape your strategies, prepare your NED-focused CV, and enhance your personal branding to increase your perceived value and market opportunities. Contact us for a free initial consultation.
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