Who Wants To Be A ... Non-Executive Director?
"Be careful what you wish
for - you may just get it" is now well established as a cliché. But how
appropriate it is, when applied to the role of the Non Executive Director
today.
It was not that long ago when
being invited to join the Board of a prestigious company was considered to be
an honour, but often where the duties of a director were not particularly
onerous. Even if the company was progressive, and recognised the benefit of
good external advice. And of course there were plenty of the "old boy
network" Boards where your role was to remain silent, and agree with the
Chairman as directed. Today, however, if you wish for and receive that Board
seat invitation take care; it may just come and bite you in unpleasant places.
As more and more companies
globally are required by legislation to have non-executive directors, you may
still find situations where the Board is not really clear on your role, and
many first time directors are not really clear on their responsibilities. Or
put another way, in an article by British dealmaker Jo High
"For some organisations,
particularly owner managers, a Non-Executive Director (NED) has much in common
with a Bidet! Being something one quite fancies but not really something one is
clear on how to use!"
Examine the role of the NED
today, and particularly the Independent NED. A person who is required, often by
law, to take as much responsibility for the running of company as an Executive
Director, but to do so on a part-time basis using whatever information they are
"fed". And in times of trouble, a NED trying to hide behind claims of
receiving "insufficient information” is unlikely to receive much sympathy
from shareholders and the media alike. Instead, they are more likely to face
accusations of incompetence for failing in their duties. "Given your
experience", the critics will say. "you should have known what
questions to ask!"
Why would anyone
willingly subject himself or herself to such reputational and professional
risk?
The whole issue of Board
Members is under review around the world. Collapsed financial institutions are
having their Boards reviewed - and often replaced! Corporate Governance issues
today are much more a feature of Board deliberations than ever before. And
rightly so, given the apparent inability of some of our most highly paid and
high profile corporate leaders to be trusted to tell the whole truth. Boards
are now required to look at major appointments, strategy, and performance.
They need to consider, in depth, the audit and remuneration issues faced by the
company. And they do so on behalf of the shareholders who, independently, they
represent.
As a result, non-executive
directors are finding it necessary to restrict the number of appointments they
accept and therefore the supply is becoming scarcer.
Hong Kong was, perhaps,
initially not as quick to make changes as fast as some other places, but there
have been improvements. Activists like Christine Loh and David Webb have
actually achieved quite a lot in this arena - one quietly and steadily, the
other in a more publicity seeking manner, - but love them or loathe them (and I
don't actually loathe David Webb - I just don't particularly like him since the
day he publicly questioned my independence and therefore my integrity - a
question I was happy to successfully refute), they have been catalysts for
change. Long may these changes continue, but I still have two concerns.
Some companies in Hong Kong still pay their
Non-Executive Directors way below appropriate compensation, given the levels of
responsibility they now have to bear. No longer can one be expected to
sit on this board or that committee just for the
"honour". Appropriate remuneration is now required to compensate
for the considerable amount of time-consuming work involved, and which carries
severe penalties and "inconvenience" for not doing that work.
And what inconvenience!
A friend of mine sits on a select few Boards. He is conscientious, careful,
professional, and the sort of person I would be pleased to share a Boardroom
with - but a company with which he was involved ran into some financial
difficulties. The next thing he knows is that the Police are all over his home,
in his absence. In fact their presence was announced by way of a mobile
telephone conversation, from the police, telling him they were in his home. No
courtesy, no consideration for the individual. They took away papers - relevant
or not. They took away a computer - relevant or not. No questions. No
apologies. He was treated with the same level of disdain reserved for a
hardened criminal.
The fact is, being a non-executive director today requires careful thought and consideration by the individual concerned. You need to represent the shareholders best interests, and you should be able to bring something useful to the company in addition to good corporate governance - a skill, a knowledge base. Your boardroom should be one that is willing to listen and record deliberations or contributions from the directors, and one that understands that today's non-executive directors are not window- dressing.

