For companies listing on any of the UK stock markets, one task which can lead to significant benefits down the line is the appointment of one or more Non-Executive Directors prior to admission. Their key role being to represent the interests of shareholders and preserve the assets of the company once floated on a stock market.
Some would argue that, because of the fiscal responsibility that they shoulder in their role, NEDÂ's with financial backgrounds are best suited to these positions. Indeed, many ex Finance Directors with successful track records have found the move to a role as NED both beneficial and satisfying.
Todays NEDs are more accountable than ever for their actions. The recent revisions to the UK Corporate Governance Code and the impact of the Higgs report brought the role of NED under more scrutiny than ever. Along with the increased risks associated with the role, the NEDÂ's importance of their contribution have increased immeasurably.
What should companies expect from their NEDÂ's?
At the very least NEDÂ's will be expected to attend monthly board meetings having read and digested any board reports. NEDÂ's may also be appointed to sub-committeeÂ's responsible for issues such as remuneration and finance.
Companies seeking appropriate NEDÂ's who bring relevant knowledge and sector experience usually prefer those that already have demonstrated their credentials in other NED roles.
The role of the NED is not to become directly involved delivering operational challenges but more to question the executive team in order to safeguard the company, its staff, and shareholders.
The benefits of Non-Executive Directors
Within the boards of successful listed companies on the stock markets are Non-Executive Directors contributing a wealth of knowledge and experience to the business. Listed company boards, regardless of their experience, can often fall into bad habits and the focus of board meetings and communication can become side-tracked without a gentle guiding hand. It is often the NED that ensures the executive team do not become side tracked by less important day-to-day issues. NEDÂ'S help the board to focus on the big picture.
The most effective NEDÂ'S are usually very well connected. Often they will have many years experience in their sector, and will have the respect of their peers and fellow businessmen/women. Their ability to open doors to new business opportunities can be a considerable boost to new business development.
NEDÂ's remain valuable assets to listed companies on the UK stock markets, acting as mentors, a stabilising force, and helping support executive teams as they negotiate the challenges of managing growing businesses.
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