In this section we offer our comments and views on a number of topics relating to the role of a Non-Executive Director in the public sector, what public sector organisations look for and how the process of recruitment is run.
The Role of a Non-Executive Director
A Non-Executive Director (abbreviated to Non-Executive, Non-Exec or NED) is a member of the board of directors of a company or organisation who does not form part of the executive management team.
In essence, the Non-Executive Director's role is to provide a creative contribution to the board by providing objective criticism.
Today, it is widely accepted that Non-Executive Directors have an important contribution to make to the proper running of organisations.
There is no legal distinction between Executive and Non-Executive Directors. As a consequence, in the UK unitary board structure, Non-Executive Directors have the same legal duties, responsibilities and potential liabilities as their executive counterparts. Clearly, it is appreciated that Non-Executive Directors cannot give the same continuous attention to the business of the company. However, it is important that they show the same commitment to its success as their executive colleagues. It follows that Non-Executive Directors are subject to the codified duties of directors contained in the Companies Act 2006 in the same way as Executive Directors. All Directors should be capable of seeing company and business issues in a broad perspective. Nonetheless, Non-Executive Directors are usually chosen because they have a breadth of experience, are of an appropriate calibre and have particular personal qualities.
Additionally, they may have some specialist knowledge that will help provide the board with valuable insights or perhaps, key contacts in related industries. Of the utmost importance is their independence of the management of the organisation and any of its ‘interested parties.’
This means they can bring a degree of objectivity to the board's deliberations, and play a valuable role in monitoring executive management. In particular, the board should include Independent Non-Executive Directors of sufficient calibre and number for their views to carry significant weight in the board's deliberations.
The functions of Non-Executive Directors are expected to focus on board matters and not stray into ‘executive direction,’ thus providing an independent view of the organisation that is removed from day-to-day running.
Non-Executive Directors, then, are appointed to bring to the board:
- Wide experience;
- Special knowledge;
- Personal qualities.
Whilst not all the same, Non-Executive Directors will largely have responsibilities in the following areas:
Strategy: Non-Executive Directors should constructively challenge and contribute to the development of strategy.
Performance: Non-Executive Directors should scrutinise the performance of management in meeting-agreed goals and objectives and monitoring and, where necessary, removing senior management, and in succession planning.
Risk: Non-Executive Directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
People: Non-Executive Directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and where necessary removing senior management, and in succession planning.
Non-Executive Directors should also provide independent views on:
- Standards of conduct;
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