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Home | Find a new job | How to become a Non-Executive Director

How to become a Non-Executive Director

People often ask about becoming Non-Executive Directors for various reasons so, when we received an invitation from non-execs.com to attend a seminar that they were running on the topic, we thought it was worth attending and creating an up-to-date page for those who have aspirations in that direction. As usual, all feedback and comment should be directed to editor@newlifenetwork.co.uk.

What are Non-Executive Directors?

  • Non-Executive Directors used to be caricatured as cronies of the Chairman (who is also a Non-Executive Director) or CEO. Fat cats, freeloading members of the ‘old boy network’, retirees who wanted to have somewhere to go other than the golf club for a decent lunch and a chat. Not an attractive scenario and for various reasons, but not least because of numerous serious corporate scandals where shareholders were left unprotected, the whole can of ‘Non-Executive worms’ has been subject to investigation, reappraisal and some rigorous new rulings – you can find out more about the fallout from the Higgs Report and the new Combined Code in the references below.
  • Unlike Executive Directors who work for the organisation on a day to day basis, usually being responsible for particular functions such as finance, technology, marketing and so on, Non-Executives have no line management responsibility but are there to ensure that the company is governed properly; that it complies with the right laws (of which there are many!), that its strategies are robust, that stakeholder interests are protected and subjected to the appropriate due diligence, particularly in the case of e.g. mergers or takeovers.
  • They are usually retained for a particular number of days per annum (which makes the knowledge part a little tricky when linked to accountability), they can serve for a particular period of time such as six years (i.e. two terms) and are sometimes paid but contrary to popular opinion are very often not paid anything other than their reasonable expenses.
  • Non-Executives should not receive share options.
What do Non-Executive Directors do?

  • They perform a variety of functions and you can find out much more detail in the references below. We have mentioned most of the key areas above but there are currently some very high profile duties around ensuring, for example, that pension funds are managed properly, audits are managed with integrity and that Executive remuneration is apportioned correctly.
  • The size of the business and the nature of its business will have an impact of course on a Non-Exec’s role. They may, however, have been recruited for a particular purpose or experience. For example, if a company is about to undertake a major change initiative, enter into a merger, trade in a new market or country or some other key transaction then they may be assigned particular duties around that, dealing with investor relations perhaps, mentoring the Executive Board on whether to accept an offer for their business and so on.
  • They may also sit on specialist committees related to remuneration, audit or talent management.
  • What seems to matter more is the way that Non-Execs carry out their duties if they are to succeed, add value and find the experience personally rewarding.
  • They must be independent minded, have integrity and the respect of the other board members, be prepared and able to look at the business from a ‘big picture’ perspective, be well informed and manage difficult decisions in a facilitative manner.
  • The chemistry with others is vital. That doesn’t mean being anyone’s patsy or a push-over, it does mean conducting yourself in a mature and professional manner and being prepared to make a stand if you don’t agree with the way things are being handled.
Why would you want to become a Non-Executive Director?

  • People become Non-Executive Directors for various reasons. The pay is very often pretty low when you consider the risks and responsibility and the amount of work required of them. The work exposes them to risks of claims of negligence quite disproportionate to the rewards. Sometimes when they do ask the difficult questions, they might be moved out in a ‘board re-shuffle’. Companies have to take out insurance to indemnify their Non-Executive Directors against possible claims from the shareholders. You should never become a Non-Executive Director without this insurance being in place.
  • At this point you might be wondering what the incentive is and how scary it all seems. Why would anyone want to sit on the board of an organisation as a Non-Executive Director? What do they get out of it?
  • Happily, the concept of service is not entirely dead and buried. Some people want to give back to society something in return for the benefits they have reaped from their work. So, they may apply to serve on the board of their local Hospital, School or College. It can appeal to a person’s sense of altruism too if they are serving on the boards of charities or not for profit organisations.
  • To a real businessperson, business is always fascinating and a Non-Executive Directorship or two can keep one’s hand in after the days of full executive responsibility have passed. Some see it as an opportunity to create a portfolio career of perhaps a couple of non-exec posts or maybe take on a Chairmanship. Not all roles as we have previously mentioned, however, carry remuneration and the demands are tough so this is by no means a soft option for the pre-retired.
  • If you have an ambitious eye to the future, it can also broaden your current executive experience in a particular sector which may prove beneficial to sharpening your leadership skills and career worth in a variety of ways.
  • Some apparently just love the perceived kudos and other power and ego based experiences it brings them. It takes all sorts!
Provided I have the skills, how would I become one?

The routes tend to be rather different depending on whether it is a public sector appointment or whether it is for a private company or a listed company, either a mega FTSE corporation or smaller plc.

There are usually details of recruitment events in our career events section.

Public Sector

The post of Commissioner for Public Appointments was created in 1995 and is independent of both the Government and the Civil Service (see the reference in essential resources). In 2004/05 it oversaw the appointment of over 3,000 Non-Executive posts: 38% of appointments made were women, 9% came from ethnic minorities and 4% were disabled. OPCA’s Code of Practice states that all senior public appointments should be governed by the overriding principle of selection on merit. They should be open to independent scrutiny and the recruitment process must be transparent and appointments are publicised openly. Search is often used proactively to ensure a strong list of interested candidates.

Private Sector

In the private sector our sources indicate that the situation is rather different. It really is a case of who you know and your perceived reputation and networks are of primary importance. High profile boards may apparently be reluctant to hire a ‘diverse’ or ‘brave’ candidate for fear of what City or media commentators will make of it, which just leads to more of the same within a closed circle of the elite. Privately owned firms tend not to get too hung up on that of course but they still tend to operate in a way that lacks real transparency and within favoured networks.

Burnishing your reputation, canny networking and high profile speaking activities in the right circles can of course all help to create a trail to your door. Have a chat to your headhunting contacts to sound them out too.

Female non-execs. According to Deloitte, among the top 350 firms, women make up only 3% of executive directors and 8% of non-executives. The Female FTSE Report 2004 states that ‘Overall companies with women directors scored significantly higher (on corporate governance indicators) than companies with all male boards….There is clear evidence that better managed companies are those with gender diversity in their boardrooms’. So, why are there not more women? Well why does the sun shine? There are plenty of lobbyists and compelling business cases out there for women to take on more senior roles in business and qualify for board appointments as either Exec or Non-Exec Directors but the old boy network and negative gender stereotypes linked to whether one has ovaries or not still prevail unfortunately. The tide will turn eventually and don’t stop clamouring for the barriers to be broken down but be prepared for a tough ride. Try the Public Sector is our advice.


Essential Resources

It is essential that you have a working knowledge and understanding of the following:

The Combined Code (2003), Higgs Smith and Turnbull Guidance and the Sarbanes Oxley Act. You can find out more at these sites or download the Higgs report at the bottom of this page.

Financial Reporting Council, Internal Control – Revised Guidance for Directors on the Combined Code, Oct 2005

All you need to know about compliance with the Sarbanes Oxley Act

Vine Publications publish The Law and Practice of Corporate Governance by Mark Womersley, a partner at law firm Osborne Clarke. This is the ‘everything you wanted to know but were afraid to ask’ volume and is written in a concise and accessible style.

‘Developing Directors’ by Colin Coulson-Thomas, published by Policy Publications (2007), is £34.95 plus p&p.
‘Winning Companies; Winning People’ by Colin Coulson-Thomas is published by Policy Publications (2007), is £24.95 plus p&p and can be ordered here. Prof. Colin Coulson-Thomas has helped over 100 boards to develop directors and improve performance.
files/graphics/filetypes/pdf The Higgs Report - 365kb
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