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One of the biggest barriers to hiring a Non-Executive Director (NED) is not knowing who the right person for your business will be. NEDs are an investment; they don’t come cheap - you need to think carefully about your choice. So, how do you find ‘the one’?The answer is simple. Making the right choice starts with the Board taking a long hard look at themselves to honestly identify their skills gaps. The topic was covered at our conference on The Value of Non-Executive Directors on 19th September 2023.Identify your skills gapsCEO of Hilton Food Group, Steve Murrells, shared a great example of how this successfully played out for him while he was CEO of the Co-Op. “What’s most important when you’re thinking about creating a Board and getting the right skills and talent around the table is where are your strengths and where are the areas you want to bring new insight into the organization?“There was a point within the Co-Op group where we knew that digital was the new paradigm and we were light in terms of technical skills on the Board. Most of the members on the Board were over fifty, including myself, so thinking about what digitally we required wasn’t going to come from our thinking.As a result, the Co-op Board took a very enlightened and seemingly unconventional root to finding and choosing the right NED for them. They went out and identified 10 of the youngest entrepreneurs in the country who had all made considerable money through start-ups and picked a young guy who was under 30 years old to join the Board as their digital expert. This very much flies in the face of convention in terms of the kind of person you’d think would make for a valuable NED. But the focus was on filling the skills gap and as a result, it was a huge success.”The power of diversityThe next step is to embrace diversity. The problem is that for many senior executives, it is often seen as easier to choose people cut from the same cloth and to stick to what you know. As Jacqui Green, a NED herself and consultant at Viridis Consulting pointed out: “The problem is that so many Boards hire a look-a-like of the last NED”, while Barry Gamble of the Non-Executive Directors’ Association, NEDA highlighted that: “Not many boards do a good job at embracing diversity and inclusion. They self-perpetuate themselves and design in the same way of the past.” By doing this, however, companies are simply throwing good money after bad. Embracing diversity is not just a nice to have, it is absolutely essential for the success of the business. Something Steve Murrells passionately believes: “I have found NEDs to be a cross-section of gender and of colour and race. I think that’s critical, given what’s expected of businesses today and the responsibilities we have to create opportunities and products that are in tune with the society we live in.” And finally…..know when it’s time for a new NEDThe final thing to bear in mind is that every NED has a shelf life. While there are no set timeframes for how long a NED should be with you, you can definitely hold onto one for too long. As Jacqui Green explains: “It’s time to move on if you’re no longer adding value”, while William Burgess, Exec Chairman at his family-run farm points out that: “If you know what your NED is going to say, it’s time for a new one.”

When it comes to taking on a Non-Executive Director (NED) role, the legal implications can sometimes seem unclear and are often one of the reasons people hesitate to sign up for the role. At our recent NED event, Partner at Roythornes Solicitors, Phil Cookson gave us invaluable insight into the legalities of the role. Straight off the bat, Phil was quick to explain that being a NED is a highly valuable and rewarding job. But it is also a ‘proper job’ and you need to go into it with your eyes open from the start. A director is a director “One of the main problems is that there is currently no statutory definition for a NED, which can in itself be a cause for concern. But it is worth remembering that in the eyes of the law, it makes no difference if you are a Non-Executive Director or an Executive Director. The same standard Director duties apply,” he explained. And these duties are: To promote the success of the company To exercise independent judgement To exercise reasonable skill, care and diligence To avoid conflicts of interest To declare any conflicts of interest To not accept benefits from third parties But there are often additional duties that apply to a NED as they are usually brought in to perform a specific role, whether it is to support the senior executives, guide the business through a merger, or to bolster the Board’s skills. This will impact the outcome of the tests that are applied to assess the success – or failings – of you as a NED. For example, what success looks like for the NED brought on for their financial acumen and experience versus one brought on for the HR expertise. Contract is kingThe non-negotiables for Phil, however, are very clear: “A NED needs to exercise reasonable care, skill and diligence and to make sufficient inquiry into the company’s business to provide an effective challenge. A NED also needs to remain independent from the executive management team and be a critical friend.” But all this is irrelevant if the role has not been clearly defined. It is vital therefore to be very clear about what these specifics are right from the start and the key here is to get a contract drawn up and signed. As Phil explains: “Contract will be king. Be specific as ambiguity creates risk. Be clear about the skills and expectations as well as your level of commitment. Also, do this at the beginning and if expectations change, document them.” Insolvency and Health and Safety – yes, there is scope for personal liabilityThere are two areas that tend to cause more concern than others - insolvency events and health and safety. When it comes to both, there is scope for personal liability as a NED. In the case of insolvency, your duties as a NED will also shift to include managing the interests of the creditors. There’s no doubt that if a business is going through this, they will turn to you for advice, turning a blind eye is simply not an option and Directors’ disqualification is a risk. Similarly, with health and safety legislation, as a director, you will be expected to show ‘consent connivance or neglect’. All this can be unnerving, but the key thing to do is your due diligence. As Barry Gamble, Senior Advisor at the Non-Executive Directors’ Association explained: “Speak to the other NEDs in the business, the accountants, the lawyers. Look closely at the accounts and really get to grips with what kind of business it is.”

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