The first step to appointing a non-executive director to your company (or becoming one yourself) is understanding what the role entails. In this short guide to becoming a non-executive director, we share definitions, essential considerations, and insights on preparing for the position.
What is a non-executive director?
Non-executive directors (NEDs) are members of the board of a company or organization but significantly are not part of the executive management team.
While executive directors are typically company employees, NEDs provide independent oversight and constructively challenge the executive team. This independence is possible because NEDs are not involved in the company’s day-to-day operations.
Why are NEDs important?
Non-executive directors can provide specialized expertise and deep industry experience. However, the real value of this role comes from its independence from those responsible for actually running the company. This detachment gives them a vantage point from which to observe and assess the performance of the company’s executive directors.
What does independence mean for a NED?
To ensure independence, a non-executive director should have no other contractual relationship with the company. While the following are not legal requirements, they are examples of situations that may compromise the NED’s independence:
- Being a former executive of the company.
- Having a past contractual relationship with the company.
- Owning shares or share options in the company.
The list is by no means exhaustive, and it could also include any relationships that compromise a NED’s ability to provide objective judgments.
Preparation for the role
If you are seeking a NED role, here are some things you can do to be prepared:
- Update your CV. Try to demonstrate a track record of making decisions and providing independent oversight.
- Show you’re part of the NED scene. Join the relevant associations, write articles, attend or speak at NED events.
- Networking. Dive into your personal and professional network from a different perspective, and you may be able to find undiscovered or dormant opportunities.
- Brush up on relevant skills. Depending on your experience, you may need to upskill in finance, legal matters, or governance in your industry.
- Get active on LinkedIn. Update your profile, start posting content around the NED space, and start making more connections.
When applying for NED roles, you will likely find more success by identifying companies and positions that fit your experience and the type of problems you enjoy solving.
Becoming a non-executive director for the first time
Your first NED role will be the hardest to secure. The Institute of Directors recommends the following intermediate steps in the meantime:
- Take an unpaid NED role with a charity or non-profit organization.
- Find a mentor who is already on one or more boards. A mentor can be a great source of information, feedback, and connections.
- Educate yourself on how boards operate, so you can “speak the language” used by boards and company governance.
NED: How well are you suited?
The critical function of a non-executive director is primarily to provide independent oversight. With this in mind, a NED must have the ability to be an independent voice who can view a company’s issues objectively and yet still maintain a constructive, collaborative approach to their role and other stakeholders. Although competitive, it can be an attractive and lucrative role to consider in the career of a strategic-minded executive.