Coveted and attractive: The role of a non-executive director
Pertinent questions to ask before accepting a position as a non-executive director. Tsholofelo Nketane delivers sage advice on the role, and why due diligence is important for both companies and candidates.
Company boards play an important active role in the dynamic corporate world. Professor Shirley Zinn, a leading director on a number of boards and a shareholder of Tuesday Consulting, says it is critical for board members to have the skills to oversee strategy, risk management and corporate culture in an ever-changing corporate environment.
The complex business environment is further challenged by digital and workforce transformation, increasing sophistication of consumers and customers, the impact of the political landscape and the resultant impact on corporate governance.
It is no longer merely an honour to be offered a position as a non-executive director, but an imperative so as to contribute to corporates using the diverse skills and experiences one has acquired over a career span. Joining a board affirms one’s position as an industry leader and requires one to uphold the highest ethical standards. It is also a privilege generally extended by association, rather than one that is openly advertised – making it even more coveted and attractive.
Taking up a position as a non-executive director (NED) can bring stimulating professional challenges, rewards and opportunities, as well as a chance to enhance one’s skillset and find innovative uses for existing skills.
If one looks at the recent failures in private and public spheres in South Africa, it is clear there is a leadership crisis on the country’s boards. This disruption, however, has provided new opportunities for boards to address the breakdown in ethics and return to good corporate governance practices.
What was also made clear during this upheaval was that being on a board can be challenging in that it can also expose directors to risks in terms of reputational damage, accounting irregularities, corruption and financial liability – which is why it is crucial to make a well-informed decision before joining the board of any organisation.
There is no legal distinction between executive and non-executive directors. Essentially, the non-executive director’s role is to provide a creative contribution to the board by delivering independent oversight and constructive challenges to the executive directors.
Non-executive directors typically don’t get involved in the day-to-day management; they are rather involved in the strategic input and policy making of the organisation, act in the interest of the shareholders and provide value through leveraging their network of outside contacts that can benefit the company.
The importance of due diligence – on both sides
Companies and boards should ensure due diligence on prospective candidates, something a top-end C-suite recruitment company will do efficiently and effectively. It is to be expected, considering the power boards can wield.
But it is equally important for a candidate to do theirs. Prior to accepting a non-executive director appointment, it is worth conducting an ethics risk assessment to determine whether an organisation has unethical practices or beliefs. To operate effectively, it is vital the company’s values are aligned to your own personal and career values.
Tuesday Consulting’s advice on what to find out
- Request a financial overview
Ask for and review copies of financial reports, annual audited documents, strategic plans and budgets, as well as a copy of the board manual, the company’s risk policy and corporate governance practices.
- Board policies
How often does the board meet, and for how long? Is the term of office for a fixed period, or open ended? What is the policy on remuneration and reappointment of directors? What is the policy on handling conflicts of interest, should they arise? If NEDs are paid, what is the remuneration – and is it a fixed amount, or does it depend on specific activities or attendances?
- Insurance policies
Would you need professional indemnity insurance or does the company have a Directors’ and Officers’ (D&O) insurance policy?
- Job description and suitability
Ask for a formal letter of appointment that outlines your specific role and responsibilities and ensure that your appointment is a good fit for the board and for you – do you bring the right skill set and experience to contribute in an effective way? Does the board use a skills matrix when appointing directors?
- Training and induction
Find out if training is provided and an induction process is in place.
- Explore board dynamics
Review the management team in terms of qualifications, experience, reputation, leadership style and governance factors. How diverse is the board, how well do they get along as a team?
It is crucial that, on accepting the position, you are able to trust fellow board members and are positive that you can make a creditable contribution that is appreciated.
Tsholofelo Nketane is a shareholder and director at Tuesday Consulting. She brings international perspective and deep insight into her areas of specialisation, including healthcare, pharmaceutical, consumer services and education, where she focuses on C-suite appointments.