Mind the Competency Gap – NED vs Executive Director

Deciding to become a non-executive director should not be done on a whim.  It’s a serious statutory role with specific legal and regulatory responsibilities.

While there may be a certain attraction about serving on a board, it’s not hard to understand why. This could include the perceived status, sitting around the board room table with ambitious like-minded peers, new professional relationships, the development opportunities it offers, access to leaders etc. If you are providing your talents to a charity or indeed an unpaid post on a state board, the satisfaction and perhaps the glow of giving back can be very rewarding.

However, before you get carried away and say yes, take a step back and consider the following.

The skills and experience required of a NED director are very different from being an executive director.  Don’t underestimate the gulf between the two.

A phrase to bear in mind on the role of a NED is “Nose in but fingers out”.  That is NED’s should not get involved in the day to day operations of the business unless there is some issue that is putting the business at risk.  If you are joining a board with only executive experience and you have not been a NED before, you may find it difficult to contribute at the right level, as the operations may currently be your comfort zone.

A NED is there to look at the big picture, the macro economic environment, company policy, strategy and setting the tone from the top in terms of ethics and values.  Executive directors are there to manage the business, implement strategy and focus on the operational.

So, if you are asked to become a non-executive director, you must be comfortable that you are bringing some unique value in terms of skills and experience to the Board and can step up to the NED plate.  Maybe that is why you were asked. If you have skill deficiencies in specific areas, do something about it beforehand, enroll for a course and get the required knowledge.

Next step is to be sure that you believe in the mission and vision of the organisation.  If so great, if not bail out now.

Don’t forget to check out the values, governance and strategy of the company, talk to the Chair, current and former directors, the CEO and take a view. Make sure you respect the other directors and would feel comfortable working with them.

Lastly conduct due diligence on the company, its financials, its D & O, and if it is looking hunky dory, press the GREEN button, but if not, press the PAUSE button and think ……is this for you. If you have any doubt, say NO.

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

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