NEDs carry great responsibility

There is an expectation that boards are populated with experienced individuals and members come to the boardroom table with a range of skills and capabilities. However, the world does not stand still and board members need to ensure that they are up to date and keep abreast of both current and future developments.

Sir Roger Carr, Chairman of BAE Systems points out in the foreword for the Non-Executive Directors' Handbook: ‘The appointment to a board as a non-executive is not a badge of honour or reward for past endeavour. It is an important role contributing considerable value and carrying great responsibility.’

Aspirant, new and experienced NEDs all need sources of reference to help them undertake what some see as an impossible task. Given that they only spend a limited amount of physical time in their company and typically receive less information and not always on a timely basis. It is important to have access to background material that is easy to digest and in an accessible format.

As Sir Roger Carr continues in his foreword: ‘Today, non-executives are a vital component of good governance and management challenge. They are needed now more than ever – at a time where the ethics and conduct of a few bad apples, on occasion, spoil the public’s view of the whole corporate barrel’.

The new Handbook published in March 2016 has been updated for its 4th Edition and provides an excellent backdrop to the role of a NED. Key features are:

  • The role of the NED – What are the essential duties and potential liabilities?
  • The effective board – What does it look like?
  • The committees – What do they do and what should they achieve?
  • Risk management – What works well and how do you link it to strategy?
  • Board performance – What does best practice look like?
  • Communication with stakeholders – What are their expectations?

The NED life-cycle used by NEDA to help tailor advice and support for its members considers four stages of NED development:

  1. Pre-role planning
  2. The first NED appointment
  3. Established NED roles
  4. Succession planning

At each stage of the life-cycle, the Handbook can be used as a source of reference providing a wealth of supporting case studies, aid memoires and checklists.

Sir Roger Carr’s conclusion is that: ‘Strength of character and depth of experience now go hand in hand as the two key requirements of the non-executive – and both have to be exercised with equal skill in good times as well as bad… Good process and procedures are the skeleton on sound governance, but people make the difference… and people, however experienced, need to keep up to date with best practice’.

In our experience the bottom line is that boards need to operate as well drilled teams and make the right decisions. The best way to improve the team is to improve yourself.

Louis Cooper is CEO of the Non-Executive Directors’ Association (NEDA). 'The Non-Executive Directors’ Handbook' is published by ICSA in association with NEDA.

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