THE NON EXECUTIVE DIRECTOR – ROLE AND IMPORTANCE

Published 05/01/2023

The role of the non executive director has become more and more important as the whole matter of corporate governance has come increasingly under the spotlight. Governance, Compliance, Equality, Diversity and Inclusion are now strongly featured on the agendas of most Boards and non executive directors must be well versed in these important subjects.

Non Executive Directors provide an independent view on the running of a business, its corporate governance and on boardroom best practice. They oversee and constructively challenge executive management in the implementation of strategy and business plans.

The Institute of Directors has a good summary for the role of the non executive director which is simply put as follows: “Essentially the non executive director’s (NED) role is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors”.

The CFI provide a very concise definition on the role of a non executive director as follows:

Non executive directors are independent advisors to a company and are members of the company’s board of directors.
Non executive directors help in strategy development within a company through positive criticism, external experience, and expertise.
Non executive directors oversee the activity of executive partners and help to ensure that they meet their objectives. They make sure that the responsibilities towards stakeholders are consistently fulfilled.

Non executive directors need to be reflective and thoughtful in their approach. They ask the difficult and challenging questions and offer considered advice based on their own extensive experience.

Non executive directors must be of strong principles and ensure the highest standards of integrity are maintained among the Board and its decisions. They must have the strength of character to stand their ground and insist the right thing is done for the company and all of its stakeholders.

Highlights about non executive directors:

A non executive director is an important member of a company’s board of directors and has no executive responsibilities. Non executive directors act as independent advisors to the Board as a whole and they have no responsibilities for any day-to-day operational activities of the company.

Non executive directors have the same onerous legal responsibilities and liabilities as the executive directors. They are involved in the planning and construction of company policies and for signing off the company’s main strategy and business plans.

Non executive directors are appointed to objectively challenge the performance of the management team and the company. They also, through advice, help executive directors achieve their objectives.

Non executive directors often participate on or Chair the affairs of committees covering disciplines such as Finance, Risk, and Executive Director’s Remuneration.

Non executive directors will almost certainly have considerable C’ Level management and Board level experience to call upon in their work to critique, support and advise the executive directors and work on sub Committees.

The role of a non executive director is generally part-time and they are remunerated for their work on the board.

The extensive outside experiences of non executive directors bring wider perspectives and insights to the thinking of the Board and it’s plans.

THE NON EXECUTIVE DIRECTOR – ROLE AND IMPORTANCE

Highlights about non executive directors:

Further reading about non executive directors:

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