NED and Board Advisors
According to the Institute of Directors the role of a Non-exec director (NED) is essentially to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors.
They are there to provide an objective input to the running of companies and in different sizes of business their role will have differing importance. An NED of a small or start up business can often be someone who helps formulate the growth strategy of the business whilst at the same time being a sounding board of the owners.
One point that is often misunderstood by both boards and people taking on the role of an NED is that there is no legal distinction between executive and non-executive directors. As a consequence, in the UK unitary board structure, NEDs have the same legal duties, responsibilities and potential liabilities as their executive counterparts.
The main difference between and NED and an executive director is that an NED will not be a full time role and as such will only be able to commit a certain amount of time each month. It is important that this is agreed at the outset of the agreement.
There continues to be much discussion about how NED’s should be remunerated, should they have equity in the business or not? If they do, will this mean they loose their objectivity? The key will be to discuss what will work best for both the business and the NED at the outset and set clear objectives for the agreement.
The key to an NED being able to add value to a business is that they should not be involved in the day to day management of the business to allow them to provide objective input.
Alternatively, if the business feels that they do not want an NED but need external input to the managing of the board they can appoint a Board Advisor. This person will provide objective input and guidance to the board without having any legal obligations to the business. As with any engagement it is important that there is an agreement put in place with clear objectives set between the board and the advisor.
As an experienced business owner having run his own business for over 20 years and having worked with many businesses in NED and Board Advisor roles, Owen Hughes is able to provide guidance and advice to boards to help them grow. Whilst he works across many sectors he has a focus on professional services, technology based firms and sport and leisure based businesses.