The independence of a Non-Executive Director should be agreed by the rest of the Board. If the Non-Exec is being proposed because he or she is a friend of the Chairman or CEO then they do not satisfy the independence criteria and it is hard to see how such a Non Exec can be truly effective and research indicates that this is often the case when “friends” are appointed as Non Execs.
Ineffective Non-Executive Directors result in ineffective Boards which can be enormously expensive and sadly we see many examples of this.
Specific expertise for a specific Board
There is a difference between being a good Non Exec and being the right Non Exec for a particular role, and this difference is often a specific skill-set or background that an organisation believes is important to have around its Boardroom table.
Some examples of Non Exec projects that First Flight have undertaken recently are:
- clients requiring NEDs with expertise in digital marketing and e-commerce;
- Financial expertise is another frequent requirement for a Board’s Non Exec;
- We are also seeing more clients requiring a Non Exec with a demonstrable strong customer-focused background;
- With many clients the NED is expected to demonstrate strategic expertise. This can extend to helping with strategy formulation and being expected to take a pro-active part in strategy development which may be a “strategy away day”; in others, the NED’s strategy responsibility is confined to questioning, challenging and refining the Executive’s proposals.
In these examples it is very difficult if not impossible for the Non Exec to be objective and contribute effectively unless they are truly Independent.
Good NEDs should be able to offer objective oversight and knowledgeable independence to help resolve disagreements impartially and make sure difficult decisions are taken wisely.
For Non Execs to be effective they must, in our view be able to think and speak independently.