As a whole, the board is collectively responsible for moving the company towards forward progression by directing the company’s affairs. A Non-Executive Director shares many of the same responsibilities as an Executive Director, but he/she is not an employee of the company and is not a part of the executive management team. Non-executive Directors have the same legal duties and potential liabilities as their executive partners.
Regardless of the size of the company, a Non-Executive Director is someone who brings scope to the board, by offering a broad perspective of company and business issues, from someone who is independent from the day-to-day running of the company. Think of the Non-Executive Director as the eyes and ears of the business. The Institute of Directors notes that the Non-Executive Director brings objective criticism to the company.
A Non-Executive Director adds value to the company by providing input and consult that is expert, independent, and external, to more fully protect the interests of the shareholders. Prime candidates for a Non-Executive Director position have a wide breadth of experience, have a personality that meshes with the rest of the board, and are business professionals of appropriate caliber.
The uniqueness of the Non-Executive Director position brings some responsibilities that are different from other members of the board. Bupa, a global health company, lists four key responsibilities of a Non-Executive Director:
- Strategic direction
- Monitoring performance
One of the most important duties of the Non-Executive Director is to look at the objectives and plans that were drawn up by the executive team. From an external perspective, the Non-Executive Director offers informed contributions and constructive criticism by providing a clearer or wider view of external factors that affect the company or the business climate. An effective Non-Executive Director will constructively challenge current plans and enhance business strategies.
A Non-Executive Director will also work collaboratively with the board to set the company’s values and standards.
Another key responsibility of the Non-Executive Director is to evaluate the performance of the management in meeting their goals and objectives.
Along with the rest of the board, the Non-Executive Director monitors the reporting of the company’s performance. An additional responsibility is to make sure that the obligations to the shareholders are clear and that they are continually met.
One of the shared responsibilities of the Non-Executive Director is to help develop a framework of reasonable and efficient controls for assessing and managing risk. A Non-Executive Director provides entrepreneurial leadership to ensure the board and shareholders that the financial controls and systems of risk management are strong and defensible.
One of the ways that a Non-Executive Director brings value to an organization is by making connections with outside contacts and opinions that can be useful in fulfilling the company’s mission and vision. The board may call upon the Non-Executive Director to represent the company to outside organizations.
The Non-Executive Director works with the board to make sure that there are sufficient financial and human resources in place to meet objectives. He or she may also be responsible for determining remuneration levels for executive directors. Other duties may be in appointing or removing executive directors, or to help in succession planning.
Non-Executive Directors need to be able to allocate enough time in their schedules to perform their duties. In addition to regular board meetings, they will meet with other directors and shareholders, take part in committees, and develop their own expertise.
A newly appointed Non-Executive Director should disclose any other significant commitments to the board, along with restraints on his or her time or schedule, as well as keeping the board apprised of any substantial changes. He should seek the agreement of the Chairman before accepting additional commitments that impact his role as Non-Executive Director. Non-Executive Directors should carve out time in their schedules to meet the expectations of their roles as outlined in their letter of appointment or as agreed to by the full board.
Meeting with Other Board Members
To assist the Non-Executive Director in keeping a broad perspective, he may request to meet the group without the executive directors present and meet at least once annually without the presence of the Chairman. In this case, the Senior Independent Director may step in as chair.
The Non-Executive Director may seek guidance on issues and be prepared to discuss them at board meetings. They may also be entitled to seek independent advice or training at the company’s expense, to further their duties.
Participating in Committee Meetings
Non-Executive Directors may reasonably expect to participate and carry out some of their duties as a member of a committee. They should be advised of the committee’s purpose, goals, and any specific additional responsibilities that will be required.
Non-Executive Directors bring outside experience and expertise to the boardroom in a way that keeps companies on track and moving forward. Most Non-Executive Directors have helped companies grow or survive tough times. When they can’t help directly, their network of contacts can prove to be valuable. Many company boards fall into non-productive habits and a Non-Executive Director can effectively get them back on track. Overall, the addition of a Non-Executive Director role plays an integral part because of the external perspective that it offers.