Over the last decade there has been considerable growth in 'portfolio careers', derived from having multiple simultaneous jobs on a flexible, interim or consulting basis. The upsides are obvious and include variety, a better work and home life balance and the ability to be your own boss.
One of the most common elements of a portfolio career are non-executive director (NED) positions as they can offer the benefit of regular income stream, help develop skills and profile as well as the obvious attraction of being included in the strategic running of a business without being bogged down by the day to day grind. These roles are often suitable for senior executives who are leaving full-time corporate employment.
However, there are downsides. Breaking into the non-executive world and securing that first role can be tricky. Often people wanting to be NEDs face the same catch 22 scenario as people looking for their first job or a change in career path; namely you can’t get a job without the experience but can't get experience without the job!
Due to the business-critical nature of a NED role, boards approving new NEDs gravitate to people who have prior experience in the area, know how a board operate and how a good NED can make a real difference.
It makes sense then that the most common way to overcome this catch 22 situation is to secure a non-remunerated NED role such as in the not-for-profit sector as this makes accessing further non-executive opportunities easier.
The Institute of Directors (IOD) estimates that as many as 75% of all NED roles are unpaid, a surprisingly high figure that tells us that, somewhat like professional football, it is hard to break into and there are not as many people earning a living from it as we might think.
The purpose of this article is to give you hints and tips on how to secure a NED role, be clear on the role of an NED, understand your legal duties and assist you in your due diligence process.
A non-executive director is a member of the board of directors of a company or an organisation but is not part of the executive management team. They are not employees; however they do have exactly the same legal duties, responsibilities and hence potential liabilities as their executive counterparts on the board.
In short, the NED role is predominantly advisory, providing dispassionate and objective criticism. According to the IOD, NEDs provide an independent view of the company as they are removed from its day-to-day running.
The IOD states that NEDs are expected to focus on board matters and not stray into 'executive direction' thus providing an independent view of the company that is removed from day to day running. The IOD highlights the 11 C's of the NED role:
While some of these C's are a little contrived, it does give a good overview of the breadth of the NED role. The UK Corporate Governance Code lists the role and responsibilities of a NED as:
What is clear is that being a NED is a proper role with real responsibilities – it is not a collection of part time jobs. Therefore, anyone taking on this role must be committed to it and fully understand the legal obligations
As we have already discussed, being a NED is a proper role with the same legal responsibilities as an executive director. Here are some key points to consider when applying for NED roles:
As previously discussed, while there are differences between executive board members and NEDs, when it comes to the law, there is absolutely no difference whatsoever. Therefore, as a NED you are bound by the Companies Act 2006 on Directors' General Duties, namely:
With these legal responsibilities, it is therefore absolutely critical that you perform comprehensive due diligence prior to accepting a NED role and do not get caught up in the 'courtship' of being offered the role without fully knowing what you are getting yourself into. In the next section we will look at some questions and ways of performing your pre-appointment due diligence.
The questions you can ask
Doing your background research
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