Ask the Experts

PwC Partner Chris Leatham РOctober 2015

I have heard a lot about non-executive directors and although I’ve never had one on my board, I wonder whether it’s something we should consider. How could a non-executive director help my business?

It’s not surprising you’ve been hearing about non-executive directors, which were once found mostly in the large corporate, but over the last five years more and more family and privately-owned businesses have been engaging non-executive directors to assist their businesses.

First things first – what are they?

A non-executive director is a member of the board of directors who is not a part of the management team, an employee of the company or associated in any other way.

They can also be called “outside directors”, as opposed to “inside directors” (who are from within the organisation).

So, what benefits does having a non-executive director bring to a company? There are a number of advantages, but the overarching one is a fresh and broader perspective to the board. This can be especially useful during board deliberations and decision-making processes as they’re not involved in the day-today running of the business and may be able to look at issues with a more independent view.

They may also see opportunities and threats from their “outside position”, which may be more difficult to identify when fully immersed in the business.

Non-executive directors bring their specialised knowledge and network connections to a company.

The contacts an established member of the industry can bring as a non-executive director are of great value.

In times when companies make strategic choices, advice from an expert at board level is extremely useful and the addition of a suitably qualified person can supplement internal resources during times of significant change.

Most importantly, you need to choose the right person. Often personal recommendations and contacts provide the best source of possible candidates. Professional advisers and existing non-executive directors can generally suggest a suitable person, who is either still engaged in the industry or may be recently retired from full-time work.

It’s also important to remember that there is a cost for non-executive directors and not every business is at the stage where they can get the full benefit from appointing a non-executive director.

Yet, as your business grows, the composition of the board, and particularly the merits of executive versus non-executive directors, should be an important consideration.

As published by Fairfax in October 2015.

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