Creative contributions and improvement, and objective criticism
A non-executive director (NED) is a member of the board of directors of a company who is not part of the executive management team. They are not employees of the company or affiliated with it in any other way. Typically, they attend monthly board meetings to offer the benefit of their advice and serve on committees concerned with sensitive issues. They are usually paid a fee for their services.
Fundamentally the non-executive director role is to provide a creative contribution and improvement to the board by providing dispassionate and objective criticism. They are not involved in the day-to-day management of the company but monitor the executive activity and contribute to the development strategy. NEDs are appointed to bring to the board independence, impartiality, wide experience, special knowledge, stature and experience.
Key benefits from appointing non-executive directors are:
- Strategy – Non-executive directors constructively challenge and contribute to the development of strategy.
- Performance – Non-executive directors scrutinise the performance of management in achieving agreed goals and objectives including monitoring, and where necessary removing senior management, and in succession planning.
- Risk – Non-executive directors satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
- People – Non-executive directors can benefit the company through their outside contacts and opinions and with connecting with networks of useful people.
Business owners that want to build large businesses should appoint at least one non- executive director to the board to benefit from the independence, knowledge and experience they can provide.