Is it time you gave a ned the nod?
By Nik Askaroff, CEO EMC Corporate Finance
Until relatively recent times, Non-Executive Directors (henceforth NEDs) were seen as the almost exclusive domain of PLCs and the very biggest private companies. Not any longer. Increasingly, private companies of varying sizes are recognising the virtues of having a voice in the boardroom independent of the executive management team.
NEDs are generally appointed to offer a “creative contribution” to the Board of Directors by giving objective criticism and advice. Although it is accepted that they can’t give the same continuous attention to the business of the company as the Executive Directors, they are expected to show the same commitment to its success.
Their independence from the management of the company is essential to their effectiveness. This allows them to bring a degree of objectivity to the Board’s deliberations and play a valuable role in monitoring management decisions. As the 1992 Cadbury Report stated, “they should bring an independent judgment to bear on issues of strategy, performance and resources, including key appointments and standards of conduct.”
NEDs are generally chosen for their calibre, their breadth of experience and their personal qualities. They may also possess specialist knowledge of use to the Board or have key contacts in related industries or financial institutions.
