THE NUMBER OF NON EXECUTIVE DIRECTORS TO HAVE ON A BOARD
The number of non executive directors (NEDs) on a board can vary depending on the size, complexity, and industry of the organisation. Generally, it is recommended that a board should have at least two NEDs to provide an independent perspective and balance the power of executive directors.
NEDs are appointed to the board to provide expertise, knowledge, and a diverse perspective to support the board’s decision-making process. They bring an objective view to the table and ensure that the board’s decisions are in the best interest of the organisation and its stakeholders.
While the number of NEDs on a board can vary, research suggests that a board of at least five members with at least two NEDs is most effective. According to a study by the Financial Reporting Council (FRC), boards with less than five members may struggle to provide effective challenge and oversight. However, smaller organisations may not require as many NEDs due to their smaller size and simpler structure.
In larger organisations or those with complex operations, a higher number of NEDs may be necessary to provide the required level of expertise and scrutiny. The UK Corporate Governance Code recommends that at least half of the board should be comprised of independent NEDs. This ensures that there is a balance of power and that executive directors do not dominate decision-making.
It is important to note that having too many NEDs can also be counterproductive. A large number of NEDs may result in a lack of clarity regarding roles and responsibilities, reduced accountability, and increased bureaucracy. Therefore, the number of NEDs should be carefully considered and based on the organisation’s needs and the skills and expertise required.
In conclusion, the number of NEDs on a board is dependent on the size, complexity, and industry of the organisation. While a minimum of two NEDs is recommended, boards with at least five members and at least two NEDs are more effective. Ultimately, the number of NEDs should be carefully considered to ensure a balanced and effective board that can provide independent oversight and support to the executive directors.
THE ROLES AND RESPONSIBILITIES OF A NON-EXECUTIVE DIRECTOR
HIRING NON-EXECUTIVE DIRECTORS