Non-executive Director
With the general public losing faith in the activities of politicians and senior business figures, the role of the non-executive director is increasing important in modern corporate governance. The modern non-executive director is appointed based on objective and professional criteria and can add real value to any type of organisation.
In large, formal organisations with strict corporate governance standards the role of the Chairman of the board and the Chief Executive Officer are normally separated. The Chairman’s role is usually non-executive and is supported by other non-executive directors. The Chief Executive and executive directors run the organisation on a day to day basis and are responsible for implementing the policies and strategies agreed by the board.
At a board meeting the executive directors report on how well they are running the organisation and recommend future strategic direction and investment. The non-executive directors review the information provided and ensure the organisation is being run for the benefit of the shareholders and that the executive directors are not abusing the trust placed in them.
In small and medium size enterprises the Chief Executive is often the owner and founder of the organisation so the role of the non-executive director is more that of an experienced advisor. Even in this situation, the non-executive director still has substantial legal responsibilities and liabilities to check facts and ensure that corporate law is being complied with. The potential value the non-executive director can add to a small or medium size enterprise is probably greater than in large organisations.
A small organisation cannot afford a large number of experienced full time directors and it is often the owner or Chief Executive who has to make all the decisions ranging from strategy down to individual action plans. The opportunity of delegation is often limited leaving the Chief Executive in a very lonely position having to make all the decisions without having anyone with whom they can discuss alternative ideas. It is in this type of situation that a non-executive director can add real value by being a sounding post for ideas and providing the benefit of their experience, expertise and contacts.
Taking into account the legal responsibilities and liabilities that a non-executive director assumes they expect to charge a reasonable fee for their services. The cost however is often lower that that of a consultant or an interim director and they tend to form a long-term relationship with the organisation and people.
If you are thinking about recruiting a non-executive director, try not to restrict the choice to only people you know or who are like you. It will be a grater benefit to recruit someone who will challenge your assumptions and has a different skill set to your own.
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Tags: board meeting, business figures, chairman of the board, chief executive officer, corporate law, executive director, executive directors, legal responsibilities, liabilities, losing faith, medium size enterprise, medium size enterprises, organisations, professional criteria, time directors
