Companies across industries are recognising the value that NEDs — non-executive directors — bring to their boards.
NEDs: do we need them? Yes, say the stats, and the experts: Non-executive directors help to drive growth and long-term sustainability.
It was once common to have NEDs only in listed companies, but now they’re popping up all over the place — including at SMEs. The goals of the extremes of NED-friendliness differ. While a large corporation might appoint one to maintain high standards of corporate governance, a smaller firm might be seeking evidence-based assurance — and holding the executives to account. A NED can also bring business experience, objective advice and credibility to the table.
Shalini Khemka, CEO and founder of entrepreneurial community E2E, believes the non-execs can contribute to company growth. “Historically, NEDs have had a focus on a company’s corporate governance,” she says, “but now, they’re more often involved in supplying expert advice.
“The emotional support that comes with that is invaluable.”
In a word (or two): part-timers. They’re members of a company board, sharing collective responsibility for the organisation — but not employees.
NEDs attend board meetings, but their role can extend to diverse tasks: leading special projects, engaging with shareholders, or representing the company at events.
Unlike executive directors, they have no operational duties at the company. As they aren’t classified as employees, they can have a more informal relationship with the company. It might be a chat on the phone, or an email, instead of formal, arranged meetings.
That independence, and detachment from daily operations, is a key advantage of non-executive directors. They should also have a wealth of experience to share — preferably gained from an array of relevant organisations. This feeds into the Why and the How when it comes to the value of their consultative services.
With their unbiased perspective, NEDs can offer a wider view and alternative knowledge: “A priceless addition to a company’s growth,” explains Khemka. Impartiality helps when the executive team is struggling to reach a consensus, or where outside experience is needed.
As a bonus, a NED can usually provide access to a wide network of contacts. “They can provide the resources to create relationships with more stakeholders,” says Khemka, “such as customers, suppliers, and potential partners.
“Whether the contacts are related to markets you want to expand into, or ones that would help an SME to grow at a quicker rate, or ones that are able to offer advice with unique knowledge and experience, they are likely to provide value to your business and its operations.
“Through their encouragement, listening and providing reassurance where necessary, the confidence and morale of the executive teams can be improved.
“Ultimately, this can foster a more cohesive leadership team.”
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