The role of non-executive director needs to be professionalized, here's how to do it

Expectations of boards of directors are getting higher and higher. It is no longer enough to protect financial wealth and maximize profit growth. Changing consumer preferences, employee attitudes and the emergence of new regulations have increased the scrutiny faced by boards of directors and companies.

Non-executive directors (NEDs) are not immune to this increased attention. Even though NEDs operate independently (their work can be described as a hands-off, hands-off operation), they remain full members of the company's board of directors, which takes collective responsibility for the success of the company. business. This means that NEDs have the same duties, responsibilities and potential liabilities as registered executive directors of a company.

In times of crisis, NEDs are increasingly expected to take on what appear to be executive-level responsibilities, often under intense media scrutiny. As such, NED's role has come under harsh criticism, with shareholders increasingly expressing outrage at perceived failures of boards of directors.

A case like the Post Office Horizon IT scandal is clearly complex and involves many different players, but successive Post Office boards have failed to act, raising questions about their governance.

Most recently, BBC chairman Richard Sharp resigned after breaching rules governing relations with Boris Johnson before his appointment. Meanwhile, Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg announced his resignation following the publication of an independent report into the US agency's toxic workplace culture.

NEDs now find themselves facing greater demands than ever before. As the scope of non-managers has expanded, so have their remits and responsibilities. But these additional demands and levels of responsibility are not reflected in the level of support NEDs receive. It is time to professionalise the role.

Lack of support

Good boards must be built on transparency, accountability and integrity, and an effective national board must have the capacity to understand, recognize and nurture these fundamental qualities of corporate governance.

Developing NED talent is essential to building an effective board

It is essential that NEDs develop a solid understanding of good corporate governance. They should be able to ensure compliance with relevant regulatory frameworks and codes; be aware of how to address potential risks that could otherwise have serious consequences for your business; and understand how to build a culture of ethical leadership and trust. This is in addition to the strategic direction they bring to organisations.

There are a number of courses and certifications available to hone and refine governance expertise. Yet, of the thousands of board vacancies that WB directors advertise across all sectors, we have yet to see any governance qualifications listed as a requirement for recruitment.

Director at sea

The importance of non-executive directors (NEOs) in UK companies has increased significantly. Although traditionally appointed by publicly traded companies, BIAs now sit on the boards of private companies, SMEs and, more recently, startups, as more and more organizations recognize the value that AIEs can provide.

However, overload has become a growing problem. This refers to NEDs sitting on too many boards, which can lead to a lack of time and attention. Setting expectations to mitigate the problem of excess control will be important as part of an increased focus on board quality.

Yet even with reasonable commitment, NEDs are expected to step in to do what is necessary in times of crisis. NEDs can quickly find themselves overworked when a crisis hits multiple businesses at once. It is common for NEDs to experience undue stress with little recognition or support from the organizations they work with.

Our members do not always seek to be paid for overtime worked, but it is clear that businesses must extend the same duty of care to their NEDs that their employees receive. This should help address any health and wellbeing concerns that may arise during times of stress.

We recommend that chairs also take some responsibility for supporting their board members and encourage NEDs to seek advice from their peers.

Why it pays to invest in NEDs

NEDs are essential to a successful business and the UK economy. Over the last decade, the non-executive director role has been instrumental in diversifying UK boards, bringing endless benefits to UK businesses, including the diversity of thought and experience essential to innovation and creativity.

Developing NED talent is essential to building an effective board of directors. Businesses should expect to get out what they put in, so invest time and resources in identifying the right people with the right expertise, compensating them competitively and offering them the right levels of support and protection .

Fiona Hathorn is the Chief Executive of WB Directors, an organisation that aims to increase diversity in executive and non-executive management teams. She also advises a number of boards and organisations.