The non-executive role on subsidiary boards
From the boards of small businesses and charities through to public organisations and listed companies, non-executive directors can add a wealth of experience, governance and independent perspective to enable the management to focus on the best direction of the business for the benefit of the organisation’s stakeholders.
As portfolio non-executive director and chairman Frank Lewis notes, sometimes organisations want to be viewed as, and to be, more professional, and a NED can help. However, it is more interesting when they are brought on for “a specific purpose – somebody retiring or the company wants an IPO or an exit” and there needs to be a plan for the next stage of the business. Non-executive directors can also help mentor the board to enable them to continue to deliver as the organisation develops and grows.
For private companies, where there is no legal requirement for non-executive directors, NEDs are often appointed as they can provide independence given that “company executive directors can be too close to the business” and not able to see or want to take the company to the next stage of development. The NED’s ability to constructively challenge the executive can add value to way the company operates and a board with complimentary skills and expertise can ensure that there is a strong understanding of the business in the boardroom.
Once a chair and board are established, it should be on the Chair’s agenda to ensure that there is a plan for their own succession. Considering what a board is looking to achieve in appointing a NED or supporting its own succession is therefore a useful consideration for any aspiring or experienced NED looking to take on another portfolio role.
Related post: Do you need a Non-Executive Director?
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