Thora Mackey, COO & Head of the Institute of Directors’ Boardroom Centre, explains what Non-Executive Directors can expect from the role.
What is the role of a non-executive director?
The non-executive director’s role can be seen as balancing that of the executive director, so as to ensure the board, as a whole, functions effectively. Executive directors have intimate knowledge of the company whereas non-executive directors are generally expected to have a wider perspective and of greatest importance is their independence from the management of the company.
Non-executive directors should take responsibility for monitoring and challenging the performance of management, especially with regard to progress made towards meeting the company’s strategic objectives.
An effective non-executive director can see issues in their totality and bring a fresh, diverse and external perspective to board discussions and decision-making
What level of experience do you need to have in order to be eligible?
There is no specific criteria for the level of experience required, it is very much on a case by case basis and dependent upon the needs of the company. It is advisable that every board should develop a skills matrix and use this to identify any gaps on the board. Non-executive directors are generally chosen because they have a breadth of experience, specific skills and can bring specialist knowledge to the board.
What are the characteristics of a successful non-executive director?
An effective non-executive director can see issues in their totality and bring a fresh, diverse and external perspective to board discussions and decision-making. They should constructively challenge management as well as strengthening a board by offering independent counsel and advice. The role demands a high degree of integrity as well an ability to negotiate and collaborate.
What defines success in this type of role?
An effective non-executive director will provide a creative and informed contribution to the strategic direction of a company and act as a constructive critic while also helping to ‘connect’ the business and the board with networks of contacts and potential investors.
Which industry experience is most in demand for these positions?
It very much depends on the company, its size and structure and the sector it operates in. Companies should consider what key skills are already available among the executive and around the boardroom table and what areas are lacking. Requirements can vary from non-executive directors with a financial, risk or accountancy background through to those who bring marketing, sales or HR experience. Expertise in the area of fintech and IT is also increasingly sought after.
How are you working to expand the pool of candidates and address the problem of ‘interlocking’ directors in Ireland?
The ‘who you know’ culture continues to dominate appointments to boards in Ireland and as such, interlocking directorships are a factor. However, more and more companies are recognising the benefits of using an independent process to source non-executive directors for their boards, particularly SMEs who see the value of leveraging the expertise of a formal appointment service. The IoD’s Boardroom Centre has a pool of over 500 business leaders available for non-executive director positions offering companies a shortlist of candidates on the basis of suitability and skills.
For SME businesses, fees can typically range from €15,000 to €25,000 but there is no one size to fit all.
On average, how much time does a person need to commit to the role and how long are they expected to stay with the company/organisation?
The onus is on each director to ensure that they have sufficient time to commit to their non-executive position. In certain regulated sectors there are limits to the number of directorships that a director can hold so as to avoid conflict of interest and to enable the director to devote the time required to effectively carry out their duties.
Being a non-executive director is about much more than attending board meetings, sufficient time must be allocated to reviewing board papers as well as getting to know the organisation – its employees, suppliers and shareholders. Many non-executive directors also sit on board committees which adds to the time and level of commitment required.
The term of appointment for a non-executive director should be fixed, albeit subject to renewal for another term. Generally, in order to maintain independence, it is recommended that a non-executive director should not serve on a board for longer than a maximum of nine years.
What can a non-executive director expect in terms of salary?
Fees for non-executive directorships vary greatly and depend on a range of factors such as the time commitment, the sector the company operates in, its size, the level of complexity and so on. For SME businesses, fees can typically range from €15,000 to €25,000 but there is no one size to fit all.
For more information see www.iodireland.ie